Cosmo Energy Faces Uphill Battle Against Hostile Takeover Bid In Oil Refining Sector

Cosmo Energy Faces Uphill Battle Against Hostile Takeover Bid in Oil Refining Sector

Cosmo Energy, the third-largest oil refiner in Japan, may face challenges in garnering shareholder support to resist a hostile takeover bid from activist investors, according to Cosmo’s CEO, Shigeru Yamada.

In a Reuters interview published on Friday, Yamada voiced apprehensions about the challenges in gaining shareholder support to thwart a hostile takeover effort. Cosmo Energy has been in a year-long battle against an activist investor group led by Yoshiaki Murakami.

The company has employed a “poison pill” strategy, allowing it to dilute the stake of activist investors if they acquire more shares without following proper procedures or without disclosing the purpose of the share acquisitions. Currently, the activist group holds a 20% stake in Cosmo Energy and aims to increase it to 24.56%.

Cosmo Energy and activist investors have been in disagreement regarding the company’s strategy and its impact on shareholder value. While Cosmo Energy’s management envisions the oil and gas development unit as a core business by approximately 2030, activist investors advocate for divesting the oil and gas development division and consolidating refineries.

Chief Executive Officer, Comos Energy, Shigeru Yamada

In June of this year, Cosmo Energy’s shareholders endorsed a “poison pill” defense mechanism against the takeover bid and controversially excluded Murakami from the vote. Following this, the activist investor group announced its intention to acquire more shares and expressed the possibility of seeking a court injunction against the poison pill if it were approved only when the group is excluded from the shareholder vote.

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Last month, Cosmo Energy called another shareholder vote, for December 14, with the proposal “Allotment of share options without contribution as part of the enactment of the Countermeasures based on the Response Policies to the Large-scale Purchase Actions.”

Ahead of next month’s vote, Cosmo Energy could struggle to win approval for a poison pill.

“We are fighting against heavy odds, as we know that certain investors flatly oppose any takeover defence,” chief executive officer Shigeru Yamada stated.