Japanese oil companies Idemitsu Kosan and Showa Shell Sekiyu have signed an agreement to create a business alliance, focused on crude purchases, oil transportation and production plans, ahead of a stalled merger. This closer cooperation is expected to save at least Yen 25bn (US$220m) within three years as of April 2017.
The merger between Idemitsu Kosan and Showa Shell Sekiyu was announced in November 2015 and expected on 1 April 2017. It was expected to create the second largest oil refining company in Japan, with a combined company controlling around 28% of the refining market in Japan, behind JX Holdings (35%, to merge with TonenGeneral Sekiyu in April 2017 too). The take over of Showa Shell Sekiyu by Idemitsu Kosan was expected to be carried out in two stages, with the acquisition of a 33.3% stake from Shell for Yen 170bn (US$1.7bn) by the end of the 2016; Idemitsu Kosan 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 Idemitsu Kosan, suspended the merger process in October 2016.