JX Holdings Inc — Japan’s largest oil refiner and wholesaler — plans to take over smaller rival TonenGeneral Sekiyu KK to form a behemoth with combined sales of ￥14 trillion (US$113.38 billion).
JX Holdings yesterday said that the two companies would combine through a share swap in 2017 in the latest move toward consolidation in a shrinking industry that is also pressured by falling oil prices.
“While we would pursue efficiency and rationalization, we are aware that is not enough to compete with foreign competitors in the time range of 10, 20 and 30 years,” JX Holdings president Yukio Uchida told reporters in Tokyo.
That recognition prompted the two companies to agree on a deal that would help improve their competitiveness, Uchida said.
A JX statement said the companies hope to attain ￥100 billion in profit improvements annually within five years of the takeover.
The intention is to establish an “internationally competitive energy, natural resource and materials group company,” it said.
Refiner Idemitsu Kosan Co earlier announced plans for a merger with Showa Shell Sekiyu KK, also in 2017.
Given their size, the deals are likely to be screened by the Japanese Fair Trade Commission for anti-monopoly concerns.
TonenGeneral operates Esso, Mobile and General gas stations.
Japan has been shuttering refineries as demand falls due to improved fuel efficiency. JX Holdings reported a ￥277 billion loss in the fiscal year that ended in March.
By reducing the number of refiners to two major companies, the industry as a whole would likely see better refining margins, Daiwa Securities Co analyst Syusaku Nishikawa said.
The companies plan to consider merging and scrapping refineries and oil terminals and integrating operations in the Kawasaki area south of Tokyo, where they have ethylene plants, the statement said.
There would be “no sacred cows” when deciding which refinery would survive or be scrapped, Uchida said.
Additional reporting by Bloomberg
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