In the latest move toward consolidation in a shrinking industry suffering from low oil prices, Japan's largest oil refiner, JX Holdings Inc., announced last Thursday that it plans to take over smaller rival TonenGeneral Sekiyu, Japan's third-largest oil refiner, forming a giant with combined sales of 14 trillion yen (US$113 billion). JX Holdings said that the two companies will combine through a share swap in 2017. Financial details of the deal were not disclosed.

In the November 23, 2015 issue of the OEM/Lube News, under the news story heading "JX Holdings in Merger Talks with TonenGeneral Sekiyu" we stated that JX Holdings and TonenGeneral Sekiyu K.K., are in merger talks and that the two companies plan to start full negotiations soon hoping to reach an agreement by the end of the year.

In a joint news release dated December 3, 2015, the two companies stated "JX Holdings, Inc. and TonenGeneral Sekiyu K.K. announce that the companies have signed a Memorandum of Understanding today regarding a business integration of their groups and have agreed on a target date of April 2017 for the business integration".

A JX statement said the companies hope to attain 100 billion yen (US$810 million) in profit improvements annually within five years of the takeover.

Given their size, the deals are likely to be screened by the Fair Trade Commission for anti-monopoly concerns.

JX Holdings has about a 30 percent market share in Japan and runs Eneos brand gas stations. Tonen General operates Esso, Mobile and General brand gas stations.

JX Holdings owns seven refineries and TonenGeneral owns four refineries. JX Holdings operates gas stations under the Eneos brand, while TonenGeneral operates Esso and other gas stations.

JX Nippon has three lube base oil plants, in Mizushima (two) and in Negishi with a capacity to produce a total of 11,900 bpd of Group I and 400 bpd of Group III base oils.

TonenGeneral has a base oil plant in Wakayama with a capacity to produce 7,100 bpd of Group I base oil.

Japan has been shuttering refineries as demand falls due to improved fuel efficiency. JX Holdings reported a 277 billion yen ($2.2 billion) loss in the fiscal year that ended in March 2015.

Japan's Idemitsu Kosan announced on November 12 it signed a non-binding agreement to merge with Showa Shell Sekiyu K.K., creating the second-largest Japanese crude oil refiner, after JX Holdings.