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Japan’s Idemitsu denies report to dilute founding family stake

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Japan’s Idemitsu denies report to dilute founding family stake

TOKYO | BY OSAMU TSUKIMORI AND TAIGA URANAKA: Wed Jun 29, 2016

Japanese oil refiner Idemitsu Kosan Co denied it plans to issue new shares to dilute its founding family’s one-third ownership, after the family issued a threat to derail a $4 billion takeover of rival Showa Shell.

Idemitsu was responding to a Kyodo News report earlier on Wednesday that said the company planned to issues new shares to an unidentified third party. Kyodo did not cite a source for its information nor the size of the potential allotment.

“There is no factual basis to any reports that we are considering the allocation of new shares to a third party,” Idemitsu said in a statement.

The family opposition is a rare case in Japan of a battle over company strategy being aired in public. It could undermine the acquisition by Japan’s No. 2 refiner by revenue of a smaller rival, one of two big consolidation moves afoot to trim Japan’s bloated refining sector.

Shares in Idemitsu and Showa Shell skidded on Wednesday after the intervention late on Tuesday from the family of founder Sazo Idemitsu, who started the company in 1911.

Along with related parties, the family holds 33.92 percent of Idemitsu shares – enough to block a vote later this year on the takeover, which includes the purchase of Royal Dutch Shell’s one-third stake in Showa Shell. Saudi Aramco also holds about a 15 percent stake in Showa Shell.

The corporate cultures of Idemitsu and Showa are too different to be amalgamated successfully, according to a statement issued Tuesday through the family’s lawyers.

“Idemitsu is a unique company in the oil industry that has strived to counter the global majors,” the family said in the statement.

The Idemitsu family also cited Iran’s rivalry with Saudi Arabia as a reason to oppose the takeover.

“Idemitsu should not rush to merge with Showa Shell, which is under the direct control of Aramco, amid a background of intensifying and enduring uncertainty over the rivalry of Saudi Arabia and Iran in the Middle East,” it said.

The family unsuccessfully tried to block the re-election of Idemitsu’s board at the company’s annual meeting on Tuesday.

Idemitsu shares closed 6.5 percent lower, while Showa Shell dropped 2.8 percent. The benchmark Nikkei 225 average ended the day up 1.6 percent.

(Reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Kenneth Maxwell and Christian Schmollinger)

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