Shares in Japan’s Idemitsu Kosan Co Ltd plunged 14 percent early on Tuesday, their biggest decline in more than six years, after the refiner said it would issue new stock to raise $1.2 billion. Idemitsu said after the market closed on Monday that it would sell 48 million new shares, equivalent to 30 percent of its outstanding shares, in a move opposed by the founding family, which is trying to block management’s plan to merge with smaller rival Showa Shell Sekiyu KK.
If the family did not take part in the raising, its stake in Idemitsu would be reduced to about 26 percent, from over a third, according to calculations by Thomson Reuters, eliminating its ability to veto the merger. “Obviously the family could participate in the global offering, but the time frame is narrow to come up with such a large amount of cash, in our view,” said Thanh Ha Pham, an analyst at Jefferies in Tokyo.
Idemitsu Kosan said the share issue will raise up to 138.5 billion yen ($1.23 billion), indicating an issue price of up to 2,885 yen per share, well below its close on Monday. Idemitsu shares were trading about 12 percent lower at 0159 GMT at 2,859 yen a share. They fell more than 14 percent earlier, the biggest intraday decline since 2011 when an earthquake and tsunami devastated large swathes of northern Japan.
Showa Shell shares surged as investors bet the move by Idemitsu would lead to an eventual merger. “This is a positive for Showa Shell (as) Idemitsu will eventually decide to fully take over Showa Shell’s minorities and merge the two companies,” said Pham.