JX Holdings and TonenGeneral Signed a MoU of Business Integration

The Japanese leading petroleum wholesaler JX Holdings, Inc. ("JXHD") and the third wholesaler TonenGeneral Sekiyu K.K. ("TonenGeneral") announced that the companies have signed a Memorandum of Understanding (the "MOU") regarding a business integration of their groups and have agreed on a target date of April 2017 for the business integration.

The two companies plan to conduct detailed examinations of, and discussions on, the integration, based on mutual trust and in the spirit of equal partnership, in order to execute a definitive agreement concerning the business integration (the "Business Integration Agreement") with a target date of August 2016.

This announcement was made following after the business integration announcement made last month by second largest wholesaler Idemitsu Kosan and the fifth wholesaler Showa Shell.

JXHD and TonenGeneral aim to achieve in excess of 100 billion yen in profit improvements per fiscal year on a consolidated basis within five years after the business integration, and will determine the details and examine methods to create additional integration effects prior to the execution of the Business Integration Agreement. In order to accomplish the profit improvements as soon as possible, the two companies will discuss and develop a plan that includes detailed descriptions of the following matters:

1. Disposition and integration of refineries (JXHD: 7 sites, TonenGeneral: 4 sites) and terminals (JXHD: 48 sites, TonenGeneral: 9 sites), among others
2. Integrated operation of production facilities in the Kawasaki area
3. Streamlining of the organization through integration and elimination of redundancies
4. Optimization of refining and manufacturing, supply and distribution and sales

The method of the business integration will be, in principle, a triangular-merger in which JX Nippon Oil & Energy Corporation, a wholly-owned subsidiary of JXHD, will be the surviving company and common shares of JXHD will be issued as consideration.

JXHD and TonenGeneral will discuss and determine the integration ratio taking into consideration multiple factors. Both companies intend to continue using each brand that is being used currently in their respective energy businesses after the business integration, and will discuss and determine the most appropriate brand strategy for the Integrated Energy Business going forward.

Keywords: Petroleum Wholesaler, Refineries, Oil Terminals, ARC Advisory Group.