Under the terms of the deal, Idemitsu and Showa Shell will merge in order to create a new company, NewCo.
The merged company will lead the effort to resolve various structural issues that are currently prevailing in the industry in addition to creating a new policy and environment.
Additionally, the new company is expected to build a supply chain together with its dealers/distributors and business partners on a shared strategy to lead the reform of the Japanese oil industry.
NewCo will also make use of its stabilized earnings base to expand overseas, apply the experience and establish a new, Japan-originated business model for energy companies.
The basic strategy of NewCo for its domestic downstream and petrochemical businesses will be to perform better compared to its competitors.
Idemitsu said that the new firm will also actively integrate and rationalize the assets owned by the companies and pursue collaborations with third parties for better utilization of existing assets.
The NewCo aims to make the most of the potential of its competitive refineries and expand the competitive petrochemical business.
The refiners, which are finalizing the terms of the deal, plan to complete the business integration between October next year and April 2017.
The MoU follows a deal signed in July by Royal Dutch Shell to sell 33.3% stake in refiner Showa Shell Sekiyu to Idemitsu Kosan for approximately JPY169bn ($1.4bn) .
The sale is a part of Shell’s plan to focus on downstream footprint on a smaller number of assets and markets.
Image: An Idemitsu service station in Japan. Photo: courtesy of 100yen/Wikipedia.
