March 31, 2020

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Tokyo High Court rules in favor of Idemitsu Kosan Co.
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The Tokyo High Court yesterday issued a ruling denying the appeal filed by representatives of the Idemitsu family against the ruling by the Tokyo District Court dismissing the petition for a provisional injunction against the issuance of new shares in Idemitsu Kosan Co., Ltd.

The issuance of new company shares would effectively sideline the founding family’s objections to the merger with Showa Shell Sekiyu. On July 3, Idemitsu’s board of directors attempted to forcibly end the deadlock with the Idemitsu family over its merger attempts with Showa Shell Sekiyu, when it approved the issuance of approximately JPY120 billion (USD1.07 billion) worth of new common shares, equivalent to about 30% of outstanding shares. The float would reduce the founding family’s stake from 33.92% to around 26%, eliminating their one-third veto power.

Based on the ruling by the Tokyo High Court, Idemitsu Kosan said it plans to proceed with the share issuance and conduct the global offering as scheduled.

Idemitsu Kosan said it plans to use the funds from the global offering to pay off some of the loans it used to acquire Showa Shell shares. Other allocation targets include a Vietnam refinery and an organic light emitting diode materials business.

Idemitsu and Showa Shell each have roughly a 15% share of the Japanese fuel retail market and their merger is seen as a means for them to survive in a declining market.

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