The Japanese Tokyo High Court confirmed a lower court ruling which rejected the Idemitsu founding family’s petition to block the Idemitsu Kosan (IK) refining company stock offering. This landmark decision clears the way for a takeover of Showa Shell Sekiyu by IK, which already announced it would proceed with a US$1.1bn sale of new shares.
The descendants of the Idemitsu founder, Sazo Idemitsu, have been battling with the IK management over the proposed Showa Shell buyout and claimed that the proposed share sale would dilute their stake in the company. The founding family quickly lodged a complaint to the court to block the stock sale, which is expected to cut its stake to about 26%, from more than a third now and then eliminating its ability to veto the December 2016 Showa Shell Sekiyu merger proposal.
The merger between IK and Showa Shell Sekiyu was announced in November 2015 and expected to start on 1 April 2017. It was expected to create Japan's second largest oil refining company in Japan, with a combined company controlling around 28% of the refining market in Japan, behind JX Holdings (35%). The takeover of Showa Shell Sekiyu by IK was expected to be carried out in two stages, first with the acquisition of a 33.3% stake from Shell for Yen 170bn (US$1.7bn) by the end of the 2016. Besides, IK would have then purchased the rest of Showa Shell Sekiyu's shares through a share swap. However, the fierce opposition of the Idemitsu founding family, which owns just over a third of IK, suspended the merger process in October 2016 until today.
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