Bloomberg News

TonenGeneral Has Biggest 2-Day Drop in Decade on Exxon Plan

January 06, 2012

(Updates with closing share price in second paragraph.)

Jan. 5 (Bloomberg) -- TonenGeneral Sekiyu K.K., the Japanese unit of Exxon Mobil Corp., had its biggest two-day drop in more than a decade after the oil refiner’s parent said it may restructure its holdings in Asia’s second-largest economy.

The shares fell 7.2 percent to close at 735 yen on the Tokyo Stock Exchange and have declined 13 percent in two days, the most since September 2001, after Reuters reported yesterday that Exxon plans to sell the bulk of its stake in the refiner.

TonenGeneral will pay an estimated 200 billion yen ($2.6 billion) to buy back more than 30 percent of its own shares from Exxon, the Nikkei newspaper reported today. Talks are continuing with TonenGeneral about a reorganization, said Kosuke Kai, a spokesman for the U.S. company in Japan. He declined to comment on the Nikkei report.

“I can imagine Exxon Mobil aren’t happy about the stock price fall if they are considering selling shares back to Tonen,” said Osamu Fujisawa, an independent energy economist who has worked at Saudi Arabian Oil Co. and Showa Shell Sekiyu K.K. “Maybe their downstream business isn’t as profitable as upstream, but I believe Exxon Mobil isn’t planning to completely pull out of Japan because the country remains an important outlet for the crude they produce.”

Exxon’s 50.02 percent holding in TonenGeneral is worth about 208 billion yen, based on today’s closing price.

Upstream Investments

Japanese refiners including JX Holdings Inc. have been investing in upstream energy projects, overseas projects or renewable energy as the nation’s long-term demand is forecast to decline because of a shrinking population.

Japan’s oil-product demand may decline at a rate of 3.5 percent a year through March 2015, according to an estimate by the country’s trade ministry.

Exxon, based in Irving, Texas, may divest most of its holding in Tonengeneral and assets including its distribution network in Japan for about 400 billion yen, Reuters reported yesterday. Kai said yesterday Exxon plans to remain in Japan after reorganizing its business in the country.

For Exxon, the move would be part of plans to focus on exploration and production of oil and natural gas and move away from refining. Its unit, ExxonMobil Yugen Kaisha, also owns a 50 percent stake in Kyokuto Petroleum Industries Ltd., a joint venture with Mitsui Oil Co., which operates a 175,000 barrel-a- day refinery in Chiba, near Tokyo.

TonenGeneral plans to fund the purchase of Exxon’s stake by borrowing from banks, and the deal may be announced early this month and completed in spring, Reuters said. Exxon will retain a share in the company and supply crude oil to the refiner, according to the report.

Philippe Ducom, the president of TonenGeneral and ExxonMobil in Japan, declined to comment on the matter today in Tokyo.

--Editors: Aaron Sheldrick, Amit Prakash

To contact the reporters on this story: Yuji Okada in Tokyo at yokada6@bloomberg.net; Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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