(adds details in paragraphs 7-10)
SINGAPORE (ICIS)--JX Holdings and TonenGeneral Sekiyu KK have reached a final agreement on Wednesday to pursue integration of their energy businesses via a share exchange, the Japanese producers said in a joint statement.
JX Nippon Oil & Energy Corp – a wholly-owned subsidiary of JX Holdings – and TonenGeneral “will consummate an absorption-type merger after the share exchange”, they said.
The share allocation ratio will be 2.55 shares of JX Holdings for every one share of TonenGeneral. A total of 928.8m shares of JX Holdings will be delivered to the shareholders of TonenGeneral.
At 12:41 Japan time (03:41 GMT), JX Holdings shares were up 2.14% at yen (Y) 386.6 ($3.75) while TonenGeneral surged 6.19% at Y960.
The share exchange is expected to be completed on 1 April 2017, in which TonenGeneral will become a wholly-owned subsidiary of JX Holdings.
TonenGeneral will be delisted on 29 March 2017, according to the statement.
The companies intend “to maximize their enterprise value by combining the business resources of their company groups and carrying out intensive business reforms” amid challenging operating conditions in Japan, and opportunities available in other Asian countries.
“Demand for petroleum products in Japan has declined by about 23% over the past 10 years. With the decreasing population, the growth of fuel-efficient vehicles and the shift to gas, electric power and other types of energy, the decline is expected to continue at a rate of around 2% per year,” the companies said.
“Meanwhile, overseas, demand for petroleum and petrochemical products is increasing in China, India and other Asian countries; however, there are already large-scale plants in Korea and elsewhere, and the construction of new or additional, highly cost-competitive plants is anticipated in developing countries as well. For these reasons, international competition in the Asian market, including Japan, is expected to increase dramatically.”
The business integration is still subject to shareholders’ approvals on 21 December 2016.
($1 = Y103)
Picture: Aerial view of JX Nippon Oil & Energy site (Source: JX Holdings Annual Report 2015)