* Two firms to hold around 20 pct stakes in each other
* Move comes amid Idemitsu founding family's opposition for
(Adds comments from statement, background)
TOKYO Dec 7 Japanese oil refiners Idemitsu
Kosan and Showa Shell Sekiyu said they have
not decided on a capital and business tie-up as reported by some
media organisations, and that they are still working towards an
The Nikkei business daily reported earlier on Wednesday that
the two companies have begun negotiating the tie-up that would
exploit synergies, but not require shareholder approval.
They aim to have it operational ahead of a planned merger
that has been delayed due to fierce opposition from Idemitsu's
founding family, it said.
"No formal decision has been made at this stage," the two
refiners said in a joint statement, referring to the reported
The management of Idemitsu, Japan's second-biggest refiner
by sales, has argued that a merger is the best course of action
in a shrinking domestic oil market, where five large and three
small refiners compete.
But descendants of founder Sazo Idemitsu, including
octogenarian son Shosuke Idemitsu - a former president of the
company and now honorary chairman - have said the businesses are
too different for a merger to work and they see no room for
Idemitsu's management in October put a full takeover on hold
indefinitely although it had planned to press ahead with a
signed agreement to acquire 33.3 percent of Showa Shell for
169.1 billion yen ($1.48 billion) from Royal Dutch Shell
The setbacks had raised questions over whether the two firms
will ever be able to combine businesses, given that the Idemitsu
founding family, which owns just over a third of the company,
could block a full deal outright.
The Nikkei said that under the capital and business tie-up
plan, Idemitsu will acquire the one-third stake in Showa Shell
within several days once it gets approval from the Japan Fair
It then plans to hand over ownership of a little over 8
percent stake to a trust bank, thereby keeping Idemitsu's voting
rights in Showa Shell at just under 25 percent.
Showa Shell, meanwhile, is set to buy a stake of around 20
percent in Idemitsu, the report added. Under Japanese law, if
Idemitsu's stake in Showa Shell was bigger than 25 percent,
Showa Shell's stake in Idemitsu would become void.
Such a capital tie-up would not need a shareholders'
approval and protect the independence of Showa Shell's
management, Nikkei said.
The two firms will also jointly operate their seven group
refineries, which is likely to lead to annual savings of around
30 billion yen ($264 million), compared with around 50 billion
yen to be achieved from the full integration, the Nikkei said.
($1 = 114.1100 yen)
(Reporting by Osamu Tsukimori; Editing by Stephen Coates and