Oil distributor TonenGeneral plans to acquire Mitsui Oil

Japan's fourth-ranked oil distributor TonenGeneral Sekiyu K.K. plans to acquire No. 7 distributor Mitsui Oil Co., a subsidiary of Mitsui & Co., sources close to the parties said Friday.

The distributors aim to strike a basic agreement by the end of March, the sources said. TonenGeneral's acquisition of Mitsui Oil would place its sales alongside those of third-ranked Cosmo Oil Co., following front-runners JX Holdings Inc. and Idemitsu Kosan Co.

The acquisition would combine Mitsui Oil's 280 affiliated gas stations, mostly in eastern Japan, with TonenGeneral's 3,460 nationwide into the third largest number in the industry.

"As announced this February in our medium-term plan, we are considering various options to seek an alliance with partners to reinforce the domestic supply chain," TonenGeneral said in a statement Thursday. "However, we do not have anything material to announce at this point."

The planned acquisition would represent the first shakeup in the industry since Nippon Oil Corp. and Nippon Mining Holdings Inc. merged into JX Holdings in 2010.

The Ministry of Economy, Trade and Industry says Japanese oil distributors intend to reduce their oil refining capacity by around 20 percent from April 2008 by next April as demand for oil products continues to decline due to Japan's aging population.

The sources said the planned TonenGeneral-Mitsui Oil deal is one of multiple reorganization plans being considered in the industry.