Nippon Oil, Nippon Mining Said to Delay Merger on SEC Filings

By Megumi Yamanaka and Yuji Okada

Feb. 26 (Bloomberg) -- Nippon Oil Corp., Japan’s biggest refiner, and Nippon Mining Holdings Inc. will delay a plan to merge in October as they need time to submit documents to U.S. regulators, people with knowledge of the situation said.

The two companies underestimated the time they would need to reconcile the differences between Japanese and U.S. accounting standards, and may take several months to complete submissions, said officials involved in the discussions, who asked not to be identified before an announcement tomorrow. The U.S. Securities and Exchange Commission requires the filings from companies that are more than 10 percent owned by U.S. shareholders, they said.

The merger, which will create Japan’s third-largest company by revenue, needs to be approved by stockholders of Nippon Oil and Nippon Mining at their annual general meetings in June. The combined entity will help save 60 billion yen ($613 million) in costs annually as the global slump in fuel demand forces the country’s refiners to reduce output and shut plants.

“It’s an issue for Japanese companies,” Taisuke Igaki, an attorney specializing in mergers and acquisition at Kitahama Partners, said by phone from Osaka. The SEC requires businesses to submit additional information in an F-4 filing before shareholders vote on matters, including mergers, he said.

Spokesmen at Nippon Oil and Nippon Mining declined to comment.

U.S. shareholders hold 31 percent of Nippon Mining, Japan’s largest copper producer, and 9.7 percent of Nippon Oil, according to Bloomberg data.

Share Performance

Under the merger plan announced in December, the companies were to sign a final agreement in March and form a holding company in October under which the two companies will be reorganized in April 2010 into three subsidiaries -- refining and sales, oil exploration and metals.

Shares of Nippon Oil have risen 38 percent since the merger was made public, while Nippon Mining’s shares have gained 22 percent in the same period.

Nippon Oil lost 51 percent of its market value in 2008 and Nippon Mining lost 47 percent. Both companies forecast losses for the year ending March 31 after oil prices slumped 71 percent from a record $147.27 a barrel on July 11.

Domestic fuel demand, already weakened by demographic changes such as a shrinking population, has been damped further by the recession as factories slash operating rates and shipping lines cut container services. Gasoline sales fell the most since 1952 in 2008.

‘Sense of Crisis’

Nippon Oil has taken steps to meet falling demand, shutting a 60,000 barrel-a-day plant in central Japan last month and announcing it will cut output for a 10th consecutive month in March.

“Declining fuel demand has heightened the sense of crisis, and further declines in our earnings will be unavoidable without decisive action,” Nippon Mining President Mitsunori Takahagi said when the merger was announced.

The merged company would cut refining capacity by 400,000 barrels a day within two years of the December announcement, Nippon Oil President Shinji Nishio said at the time. That’s 22 percent of their combined current capacity. The company, which has yet to be named, will have 37 percent of the domestic refining market and a capacity of 17.9 million barrels a day.

The deal will create a business with revenue of 11.9 trillion yen for the year ended March, ranking third in Japan after Toyota Motor Corp. and Honda Motor Co., according to data compiled by Bloomberg employing the U.S. GAAP accounting standard.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.