Japan's Idemitsu dives on US$1.2b share sale news

[TOKYO] Shares in Japanese energy giant Idemitsu Kosan plunged Tuesday following news it is raising US$1.2 billion in a share sale ahead of a proposed merger with rival Showa Shell Sekiyu that is opposed by the company's founding family.

The stock fell as much as 13 per cent, the most in six years, before ending the day down 11.2 per cent at 2,896 yen. Showa jumped 7.04 per cent to 1,125 yen.

Idemitsu's fall came as a filing showed it plans to raise about 138.5 billion yen in the stock sale, which could dilute its founding family's 34 per cent ownership stake and possibly clear the way for a merger of the rival refiners.

The family - which has previously tried to block the US$1.7 billion merger, pointing to a possible corporate culture clash and Showa's close ties with Saudi Arabia - said it plans to file an injunction to stop the stock sale.

"This was almost certainly done to dilute the founding Idemitsu family's holdings so the merger can take place," said Andrew Clarke, director of trading at Mirabaud Asia in Hong Kong.

"I imagine the family will move to block the issue, so the merger could be delayed." The sale of 48 million shares would shrink their stake in Idemitsu to around 26 per cent, according to Bloomberg News, below the one-third threshold needed to block a merger.

An Idemitsu spokesman said the sale is meant to help pay for investments rather than dilute the family's holding.

AFP