Idemitsu and Mitsubishi Begin Feasibility Study on Integration of LPG Businesses
Posted: 18 April 2005
Idemitsu Kosan Co., Ltd. (Idemitsu Kosan) and Mitsubishi Corporation (MC) haveagreed to begin a feasibility study related to the possible integration of their respectiveliquefied petroleum gas (LPG) businesses. Specifically, we will examine the integrationof Idemitsu Gas and Life Co., Ltd. (IGL) with MC’s LPG Unit and Mitsubishi
Liquefied Petroleum Gas Co., Ltd (MLPG) in an effort to further advance the LPGbusinesses of both companies.
1. Scope of the Integration Under Consideration
(1) Integration of the LPG Business Divisions of the MC Group In order to perform at maximum efficiency across the full spectrum of LPG business,from import and foreign trading to domestic sales, MC will examine the integration ofits LPG Unit, which is engaged in importing and foreign trading of LPG, with itssubsidiary, MLPG, which is engaged in domestic sales of LPG.
(2) Integration of MLPG with IGL Aiming to become a primary distributor of LPG that further emphasizes the customer’sviewpoint, MC and Idemitsu Kosan will consider integrating MLPG and IGL to createan integrated company. Through the merger, they would aim to rationalize operations and reduce costs. At the same time, they would strive to provide customers with energy and other high value-added products and services that offer quality, relief, andconvenience.
2. Reasons Behind the Integration
(1) With deregulation and further liberalization of the energy sector, barriers segregating different types of energy have been decreasing. As primary distributors of LPG, and also for our affiliated retail outlets (sales agents), it is critical for us to plan to quickly fortify our capacity. At the same time, we are already approaching the limits of realizing further cost reductions within our respective business groups. Our preliminary analysis indicates that the integration of our businesses presents the best way for us to achieve greater managerial efficiency.
(2) LPG is a clean, environmentally-friendly source of energy. In addition, as LPG is distributed in dispersed form, it can be relied upon even when other utilities are disrupted due to natural disasters. Furthermore, Japan’s national Basic Energy Plan lists LPG as an energy source which we should plan for increased future demand. In order to respond to these expectations, it is necessary to further develop the LPG business through technologic innovation, enhancement of logistics systems, and other improvements. Through the integration of our businesses, we can hope to speed up these efforts while raising the efficiency of investments made in technological development and other areas.
(3) As Japan is the world’s largest importer of LPG, there is a strong desire to secure a stable supply through the diversification of supply sources and other means as well as to realize lower supply costs. Through the integration of our businesses, it will be possible to secure an even more stable supply of LPG by increasing the number of ships in our fleet for off-shore trading and transport of LPG, thereby leveraging advantages of scale and allowing for increased flexibility.
Moreover, by taking the perspective of the consumer, the integrated company will naturally strive to establish a totally safe system as well as aim to provide customers with high value-added products and services. In order to achieve this, we will aim to create a company that can earn the trust of customers through the promotion of even sharper sales platforms and the development of new businesses.
3. Future Schedule
(1) The four companies will establish a business integration committee and discuss matters related to the name, organization, systems, and office network for the integrated company.
(2) The target date for launching the operations of the integrated company is April 1, 2006.
4. Outline of the Integrated Company
(1) Integration ratio : Idemitsu 51 : Mitsubishi 49
(2) Company Executives : Mitsubishi to appoint the first Chairman, Idemitsu to appoint the first President
(3) Domestic Sales Volume : Approx. 3.7 million tons (20% market share)
(4) Import Volume : Approx. 3 million tons
(5) Sales : Approx. 400 billion yen (FY2003 integrated-basis)
(6) Number of Employees : Approx. 350
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