Idemitsu Kosan : Notice Regarding Commencement of Tender Offer for Shares of TOA Oil Co., Ltd.（PDF：724KB）

December 15, 2020

Press Release

Company Name: Idemitsu Kosan Co.,Ltd. Representative Director & Chief Executive Officer: Shunichi Kito

(Company Code: 5019, TSE, First Sect.) Contact person:

Munehiro Sekine, General Manager,

Investor Relations Office, Finance Department (TEL: [phone])

Notice Regarding Commencement of Tender Offer for

Shares of TOA Oil Co., Ltd. (Securities Code: 5008)

Idemitsu Kosan Co., Ltd. (the "Tender Offeror") hereby announces that pursuant to a resolution adopted at its board of directors' meeting held on December 15, 2020, it has resolved to acquire the shares of common stock (the "Target Company Shares") of TOA Oil Co., Ltd. (Code: 5008, Second Section of Tokyo Stock Exchange, Inc. (the "Tokyo Stock Exchange"); the "Target Company") through a tender offer (the "Tender Offer") under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the "Act"), as described below.

1. Purpose of the Purchase

1. Overview of the Tender Offer
   The Tender Offeror, as of today, owns 6,234,425 shares (ownership ratio (Note): 50.12%) of the Target

Company Shares listed on the Second Section of the Tokyo Stock Exchange, and the Target Company is a consolidated subsidiary of the Tender Offeror.

(Note) The "ownership ratio" refers to the ratio to the number of shares (12,439,909 shares) obtained by subtracting the number of treasury shares owned by the Target Company as of September 30, 2020 (3,591 shares) from the total number of issued shares as of September 30, 2020 as stated in the "Second Quarterly Report for the 148th Fiscal Year" submitted on November 13, 2020 by the Target Company (the "Target Company's Second Quarterly Report") (12,443,500 shares) (rounded to the nearest hundredth, which also applies with regard to subsequent descriptions of ownership ratio).

At the board of directors' meeting held on December 15, 2020, the Tender Offeror resolved to implement the Tender Offer as part of a transaction intended to acquire all of the Target Company Shares (excluding, however, the Target Company Shares owned by the Tender Offeror, as well as the treasury shares owned by the Target Company; the same applies hereinafter) and to make the Target Company a wholly-owned subsidiary of the Tender Offeror (the "Transaction").

With respect to the Tender Offer, the Tender Offeror has set a minimum planned purchase quantity of 2,058,875

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shares (ownership ratio: 16.55%), and if the total number of shares tendered in response to the Tender Offer (the "Tendered Shares") falls below this minimum planned purchase quantity, the Tender Offeror will purchase no Tendered Shares. On the other hand, as stated above, the Tender Offeror intends to acquire all of the Target Company Shares and has therefore not set a maximum planned purchase quantity, and if the total number of Tendered Shares is equal to or exceeds the minimum planned purchase quantity, the Tender Offeror will purchase all of the Tendered Shares. The minimum planned purchase quantity (2,058,875 shares) is intended for the Tender Offeror to make the Target Company its wholly-owned subsidiary through the Transaction. When implementing the procedures for the share consolidation necessary for the Tender Offeror to make the Target Company its wholly-owned subsidiary as stated in "(II) Share Consolidation" of "(4) Post-Tender Offer Reorganization Policy (Matters Regarding a So-called"Two-Step Acquisition")" below, a special resolution of the shareholders' meeting as set forth in Article 309(2) of the Companies Act is required. Therefore, the minimum planned purchase quantity (2,058,875 shares) was set as to allow the Tender Offeror alone to satisfy the requirement. Furthermore, the minimum planned purchase quantity (2,058,875 shares) was set as the number obtained by the following formula: (i) the number of treasury shares owned by the Target Company as of September 30, 2020 (3,591 shares) is subtracted from the total number of issued shares of the Target Company as of September 30, 2020 as stated in the Target Company's Second Quarterly Report (12,443,500 shares); this amounts to 12,439,909 shares, which corresponds to 124,399 voting rights; (ii) such number of voting rights is then multiplied by 2/3 (82,933 voting rights) (rounded up to the nearest whole number); (iii) such number of voting rights (as rounded) is multiplied by 100 shares, which is the share unit number of the Target Company; and (iv) the number of the Target Company Shares owned by the Tender Offeror as of today (6,234,425 shares) is subtracted from the product calculated in step (iii).

As the Tender Offeror intends to make the Target Company its wholly-owned subsidiary, if the Tender Offeror fails to acquire all of the Target Company Shares during the Tender Offer, the Tender Offeror will acquire all of the remaining Target Company Shares by implementing the procedures as described in "(4) Post-Tender Offer Reorganization Policy (Matters Regarding a So-called"Two-Step Acquisition")" below to make the Tender Offeror the sole shareholder of the Target Company.

Furthermore, according to the "Statement of Opinion on Approval of the Tender Offer for TOA Oil Shares by Our Parent Company Idemitsu Kosan Co., Ltd. and Recommendation for Tender" (the "Target Company Press Release") published by the Target Company on December 15, 2020, at the Target Company's board of directors' meeting held on December 15, 2020, the Target Company resolved to express its opinion to support the Tender Offer and to recommend that the Target Company shareholders tender their shares in the Tender Offer.

For details regarding the Target Company's board of directors resolutions stated above, please refer to the Target Company Press Release, as well as "(vi) Approval of All Directors (Including Those Who are Audit and Supervisory Committee Members) of the Target Company Without Conflicts of Interest" of "(Measures to Ensure Fairness of the Tender Offer, Such as Measures to Ensure Fairness of the Tender Offer Price as Well as Measures to Avoid Conflicts of Interest)" of "(II) Details of the Valuation" of "(4) Basis for Valuation of the Purchase Price" of "2. Overview of the Purchase" below.

1. Background, Purpose and Decision-Making Process Leading to the Decision to Implement the Tender Offer, and Post-Tender Offer Management Policy

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1. Background, Purpose and Decision-Making Process Leading to the Decision to Implement the Tender Offer
   As of September 30, 2020, the Tender Offeror, its 163 subsidiaries, including the Target Company, and 70

affiliates (collectively, the "Tender Offeror Group") conduct (i) fuel oil business, (ii) basic chemicals business, (iii) functional materials business, (iv) power and renewable energy business, (v) resources business, and (iv) other businesses. The Tender Offeror was established by Mr. Sazo Idemitsu, the founder, as Idemitsu Shokai in Moji City, Fukuoka Prefecture (currently, Moji Ward, Kitakyushu City) in June 1911 and started sales of petroleum mainly in the Kanmon area. In March 1940, Mr. Sazo Idemitsu established Idemitsu Kosan Co., Ltd. in Tokyo, and Idemitsu Shokai merged with Idemitsu Kosan Co., Ltd. in November 1947. The Tender Offeror was listed on the First Section of the Tokyo Stock Exchange in October 2006 and still remains listed thereon.

In December 2016, the Tender Offeror acquired 117,761,200 shares in Showa Shell K.K. ("Showa Shell") (equivalent to 31.3% of the total number of issued shares at that time) from The Shell Petroleum Company Limited and The Anglo-Saxon Petroleum Company Limited, which were subsidiaries of Royal Dutch Shell plc, and thereafter, the Tender Offeror made Showa Shell its wholly-owned subsidiary through a share exchange which resulted in the Tender Offeror becoming the wholly-owning parent company and Showa Shell becoming the wholly-owned subsidiary company, effective on April 1, 2019. Thereafter, the Tender Offeror conducted an absorption-type company split in which the Tender Offeror was the succeeding company and Showa Shell was the splitting company, which became effective on July 1, 2019 (the "Absorption-type Company Split"), and the Tender Offeror succeeded to all of the businesses of Showa Shell from Showa Shell.

On the other hand, the Target Company was established as Nippon Juyu Co., Ltd. in February 1924, and its purpose was to import and sell petroleum products. In April 1942, upon accepting a transfer of some of the operating assets of Nichibei Koyu Co., Ltd., Nippon Juyu Co., Ltd. changed its name to TOA Oil Co., Ltd. The Target Company was listed on the Tokyo Stock Exchange in May 1950, and it built a refinery and commenced the operations of an atmospheric distillation unit in Kawasaki City, Kanagawa Prefecture in July 1955 in order to enter into the petroleum refining business. The Target Company was listed on the Osaka Securities Exchange Co., Ltd. (the "Osaka Securities Exchange") in January 1953 and was also listed on the Nagoya Stock Exchange, Inc. (the "Nagoya Stock Exchange") in October 1961. However, the Target Company was delisted from the Nagoya Stock Exchange based on its own application in March 2006 and was delisted from the Osaka Securities Exchange based on its own application in April 2006. Currently, the Target Company is listed on the Second Section of the Tokyo Stock Exchange. In addition, the Target Company entered into an electric power purchase agreement with Tokyo Electric Power Company, Co., Ltd. in January 1998 and commenced and has continued to this day the business of efficiently generating electricity using by-produced gas and residual oil generated in the process of refining crude oil as fuels and supplying electricity to outside parties. As of today, the Target Company engages in petroleum refining and electric power generation exclusively for the Tender Offeror and delivers the entire quantity of each produced petroleum product and electricity to the Tender Offeror (the Target Company thereafter purchases a part of the electricity from the Tender Offeror and sells it to TEPCO Energy Partner, Incorporated). The Target Company, as an operator of a core refinery of the Tender Offeror Group, which has undertaken the role of supplying petroleum products to eastern Japan, among others, with the Tokyo metropolitan area having the largest domestic demand, conducts electric power generation business using by-produced gas and residual oil generated in the refining business and the refining process in which crude oil and raw oil are processed into various petroleum products in accordance with the master agreement between the Target Company and the Tender Offeror, dated May 31, 2018, regarding the outsourcing of crude oil refining and electric power generation.

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The Keihin Refinery of the Target Company (Kawasaki City, Kanagawa Prefecture) has various facilities, including a flexicoker (Note 1), and has an installation ratio of residual oil processing units of 99% (rounded to the nearest whole number). Compared to the average installation ratio of residual oil processing units of domestic refineries of approximately 50.5% as of the end of March 2017, as stated in the "Annual Report with respect to Energy for Fiscal Year 2019 (Energy White Paper 2020)" published by the Agency for Natural Resources and Energy, the Keihin Refinery has a high installation ratio of residual oil processing units. The Target Company believes that by utilizing these facilities, it specializes in refining of heavy oils and raw oils, and efficiently refines them into high value-added products, such as gasoline, kerosene, and diesel oil. In addition, operations of the refinery and the electric power plant have been efficiently integrated and have achieved high energy efficiency and effective use of resources.

(Note 1) A flexicoker is a kind of heat treatment equipment unit that pyrolyzes vacuum residual oil, which is a raw material of C heavy oil and asphalt, at a high temperature, and enhances the yield of high value-added products, such as gasoline and diesel oil, etc.

With regard to the capital relationship between the Tender Offeror and the Target Company, in December 1979, Showa Sekiyu K.K. purchased 24,806,250 Target Company Shares (equivalent to approximately 25% of the total number of issued shares of the Target Company at that time) from ITOCHU Corporation and Showa Sekiyu K.K. replaced ITOCHU Corporation as the largest shareholder of the Target Company. Thereafter, Showa Sekiyu K.K. merged with Shell Sekiyu K.K. and became Showa Shell. For the purposes of strengthening the alliance between Showa Shell and the Target Company through Showa Shell's further capital participation in the Target Company, improving the Target Company's financial structure by enhancing its shareholder equity and ensuring the continuous development of its business, the Target Company conducted a capital increase through a third-party allocation to Showa Shell in October 2005 (25,210,000 shares, which was equivalent to approximately 20.26% of the total number of issued shares of the Target Company after the capital increase at that time, were allocated to Showa Shell). As a result of the capital increase through a third-party allocation, the number of the Target Company Shares held by Showa Shell became 62,344,250 shares (equivalent to approximately 50.10% of the total number of issued shares of the Target Company at that time), and the Target Company became a consolidated subsidiary of Showa Shell. Prior to the capital increase through a third-party allocation, Showa Shell acquired 12,328,000 Target Company Shares (equivalent to approximately 12% of the total number of issued shares of the Target Company immediately before the capital increase through a third-party allocation), although the Tender Offeror is unable to confirm the time of the acquisition, method of the acquisition, and other details regarding this acquisition. Thereafter, as a result of the share consolidation conducted by the Target Company in which 10 shares of common stock were consolidated into one share, which became effective on October 1, 2018, the number of the Target Company Shares held by Showa Shell became 6,234,425 shares (equivalent to approximately 50.11% of the total number of issued shares of the Target Company at that time). In addition, the Tender Offeror succeeded to all of the Target Company Shares held by Showa Shell through the Absorption-type Company Split which became effective on July 1, 2019, and the Target Company became and has remained a consolidated subsidiary of the Tender Offeror to the present.

In the petroleum industry to which the Tender Offeror and the Target Company belong, the domestic demand for petroleum products reached a peak in 1999 and has since been on a gradual decrease due to the declining population and proliferation of eco-cars. It is anticipated that this trend will be accelerated in the future and, according to the

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