Driven by Japan’s shrinking oil demand, JX Holdings Inc. and TonenGeneral Sekiyu K.K. announced that they have signed a Memorandum of Understanding (MoU) to merge their businesses, with a target date of April 2017. A definitive agreement will be executed by August 2016, they said.
The two oil companies have a combined net asset of JPY 2,576 billion (USD 20.9 billion). JX has seven refineries, while TonenGeneral has four. Combined, they will have a total refining capacity of 2,124 thousand barrels per day (KBD), 57 terminals and 14,175 service stations. Total annual fuel sales between the two is 79 million kiloliters per year. JX Holdings has 26,415 employees, while TonenGeneral has 3,450.
The merger would allow the two companies to improve profitability by JPY 100 billion (USD 811 million) per year within five years and “establish a strong company group,” they said.
In order to accomplish the profit improvements as soon as possible, the two companies will look at disposing and integrating refineries and terminals, integrating their production facilities in the Kawasaki area, streamlining their organization and optimizing refining and manufacturing, supply and distribution and sales, they said.
JX Holdings and TonenGeneral intend to continue using their respective brands after the merger.
The two companies would combine through a share swap.