Japanese Oil Company Merger Present

[brelief@xxxxxxx]

Subject: Japanese Oil Company Merger Presents Great Target!

(Please note that Mitsubishi has been offered as a great candidate for a
boycott of Japanese involvement and investment in Burma.  Nippon Oil,
Nisseki, is already deeply involved in the new Yetagun Pipeline.  Together,
they present quite a target!)

Daily Yomiuri 
October 29, 1998

Nippon, Mitsubishi Oil merge

New firm to become nation's top oil wholesaler 
Yomiuri Shimbun

Nippon Oil Co. and Mitsubishi Oil Co., two of the nation's major petroleum
refiners and wholesalers, have agreed to merge next April, the presidents of
the two companies announced Wednesday.

The new firm, to be named Nisseki Mitsubishi Co., will become the largest
oil company in Japan, with annual sales of nearly 4 trillion yen.
It will overtake Idemitsu Kosan Co., the current industry leader, in terms
of sales, and market share.

Nippon Oil is the country's second largest oil wholesaler, while Mitsubishi
Oil ranks sixth. 

Many Japanese oil wholesalers have been experiencing rapid declines in
business performance because of an excess oil supply and intensified
gasoline sales competition. 

By joining forces, Nippon Oil and Mitsubishi Oil hope to survive by
expanding their market share and streamlining their business operations. 

Since the liberalization of imports of oil products in April 1996, the
nation's oils industry has been exposed to major international oil companies
backed by hugely amounts of capital. 
 
Analysts expect the merger of the two oil companies to accelerate
realignment of the domestic petroleum industry.

At extraordinary meetings of their respective boards Wednesday morning,
Nippon Oil and Mitsubishi Oil approved a memorandum of understanding for the
merger agreement, paving the way for the signing of a formal agreement in
late November.

Nippon Oil will be the surviving entity; with the merger ratio set at one
Nippon Oil share against 0.525 share of Mitsubishi Oil.

Nippon Oil President Hidejiro Osawa will become the president of the new
company and Mitsubishi Oil President Yoshihiko Izumitani will assume the
post of chairman. 

The new company will seek to achieve a cost cut of 70 billion yen through
such means as a reduction in the number of employees five years after the
merger.

The combined share of fuel oil sales, including gasoline and heavy oil, of
Nippon Oil and Mitsubishi Oil totaled 23.9 percent in fiscal 1997, with
Idemitsu Kosan far behind, at 16 percent.

Annual sales of the merged company after a consolidated settlement of
accounts including its subsidiaries will amount to about 4 trillion yen,
making it the 10th-largest oil company in the world.

Osawa told a news conference that the merger will put the two companies in a
complementary relationship in oil development, as there is no overlap in the
placement of their large-scale refineries.

Nippon Oil and Mitsubishi Oil both have no foreign affiliations. They have
had tie-ups since 1984, such as jointly supplying each other with products.

Mitsubishi Oil previously held negotiations with foreign-affiliated Showa
Shell Sekiyu K.K. on integration of the refinery business, but the talks
were deadlocked when Mitsubishi Oil called for a suspension of the
negotiations.

Mitsubishi Oil has experienced two consecutive years of unconsolidated
pretax losses since fiscal 1997. It is expected to post losses of 9 billion
yen for the current fiscal year.

Both the Mitsubishi group and the oil industry have welcomed the merger, as
Mitsubishi Oil was not expected to survive alone.

Nippon Oil, noted for its strong financial foundation, is therefore seen as
coming to the rescue of Mitsubishi Oil in the latest merger agreement.

According to the Petroleum Association of Japan, recurring profits of 29 oil
whole-sale and refining companies totaled 62.1 billion yen in fiscal 1997,
down 45.7 percent from a year earlier for the fourth consecutive yearly
decline due to price competition among pump stations.

The figure was about one-sixth the 370 billion yen recorded in fiscal 1993,
the highest in the past 10 years.

Against such a backdrop, the domestic oil industry has been seeking to carry
out drastic structural reforms, including realignment.

The merger between Nippon Oil and Mitsubishi Oil will be the first shakeup
in the oil industry since the 1992 creation of Japan Energy Corp. through
the merger of refiner Nippon Mining and wholesaler Kyodo Oil.

Three wholesalers merged in 1986 to establish Cosumo Oil Co.

Kaoru Yosano, minister of International Trade and Industry, issued a
statement Wednesday welcoming the announcement of the coming merger between
Nippon Oil and Mitsubishi Oil, saying it indicated the two firms will
further streamline their business operations to cope with the severe
business environment in the future.

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