Idemitsu Kosan : Notice Regarding Commencement of Tender Offer for Shares of TOA Oil Co., Ltd. (Securities Code 5008)（PDF：791KB）

October 3, 2022

Press Release

Company name: Idemitsu Kosan Co., Ltd.

Representative Director & Chief Executive Officer: Shunichi Kito

(Company Code: 5019, TSE, Prime Market)

Contact person:

Daisuke Mogi, General Manager, Investor Relations Office, Finance & Accounting 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 September 30, 2022, it has resolved to acquire the shares of common stock (the "Target Company Shares") of TOA Oil Co., Ltd. (Code: 5008, Standard Market 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 1): 50.12%) of the Target Company

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

(Note 1) The "ownership ratio" refers to the ratio to the number of shares (12,439,271 shares) obtained by subtracting the number of treasury shares owned by the Target Company as of June 30, 2022 (4,229 shares) as described in the "Consolidated Financial Summary for the First Quarter of the Fiscal Year Ending in March 2023 (Japan GAAP)" published on July 29, 2022 by the Target Company (the "Target Company's Financial Summary for the First Quarter") from the total number of issued shares as of June 30, 2022 as described in the "First Quarterly Report for the 150th Term" submitted on August 8, 2022 by the Target Company (the "Target Company's First 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 September 30, 2022, 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 1

"Transaction").

With respect to the Tender Offer, the Tender Offeror has set a minimum planned purchase quantity of 2,058,375 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 described 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 (2,058,375 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 described 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 (Act No. 86 of 2005, as amended; the same applies hereinafter) is required. Therefore, the minimum planned purchase quantity (2,058,375 shares) was set as to allow the Tender Offeror alone to satisfy such requirement. Specifically, the minimum planned purchase quantity (2,058,375 shares) was set as the number obtained by the following formula: (i) subtracting the number of treasury shares owned by the Target Company as of June 30, 2022 (4,229 shares) as described in the Target Company's Financial Summary for the First Quarter from the total number of issued shares of the Target Company as of June 30, 2022 as described in the Target Company's First Quarterly Report (12,443,500 shares); this amounts to 12,439,271 shares, which corresponds to 124,392 voting rights; (ii) then multiplying such number of voting rights by 2/3, which equals to 82,928 voting rights; (iii) multiplying such number of voting rights (as rounded) by 100 shares, which is the number of shares in each unit of the Target Company; and (iv) then subtracting the number of the Target Company Shares owned by the Tender Offeror as of today (6,234,425 shares) from the result calculated in step (iii) above, which equals to 2,058,375 shares.

Upon the Tender Offer, the Tender Offeror has executed an agreement (the "Tendering Agreement") with Cornwall Capital Management LP (number of shares owned: 3,918,100 shares; ownership ratio: 31.50% (Note 2); "Cornwall"), which is equivalent to a major shareholder holding the second largest shareholding of the Target Company, as of September 30, 2022, to the effect that all of the Target Company Shares substantively owned by Cornwall through funds it operates (this means it has the authority necessary to invest in shares based on a discretionary investment agreement or any other agreement, or any provision of law; the same applies hereinafter) will be tendered in the Tender Offer (the "Shares Agreed to be Tendered"). For the outline of the Tendering Agreement, please refer to "(6) Items Regarding Critical Agreements Related to the Tender Offer" below.

(Note 2) The fact of Cornwall being equivalent to a major shareholder of the Target Company and its ranking among the Target Company's shareholders are based on the number of shares substantively owned by Cornwall, which the Tender Offeror has confirmed directly with Cornwall.

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

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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 September 30, 2022, at the Target Company's board of directors' meeting held on September 30, 2022, 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.

The resolution at the board of directors' meeting of the Target Company mentioned above was adopted on the premise that the Tender Offeror intended to make the Target Company a wholly-owned subsidiary of the Tender Offeror through the Tender Offer and the subsequent procedures, and that the Target Company Share would be delisted from the Tokyo Stock Exchange. In addition, in the resolution at the board of directors' meeting, the Target Company resolved to withdraw the "Plan to Meet the Listing Maintenance Criteria for the New Market Segment" (the "Plan") published by the Target Company on December 13, 2021.

For details of 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

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

As of June 30, 2022, the Tender Offeror, its 184 subsidiaries, including the Target Company, and 58 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 as a result of the restructuring of market divisions of the Tokyo Stock Exchange as of April 4, 2022, it currently is listed on the Prime Market of the Tokyo Stock Exchange.

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.

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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 once 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 Standard Market of the Tokyo Stock Exchange as a result of the restructuring of market divisions of the Tokyo Stock Exchange as of April 4, 2022 (before the restructuring of market divisions, it was listed on the Second Section of the Tokyo Stock Exchange). According to the Target Company Press Release, in connection with the restructuring of market divisions of the Tokyo Stock Exchange, on December 13, 2021, the Target Company submitted an application form to the effect that it would select the Standard Market in the restructuring of the market divisions in April 2022 and disclosed the Plan. Thereafter, at the board of directors'meeting of the Target Company held on September 30, 2022, it resolved to express an opinion to support the Tender Offer, which premises on the delisting of the Target Company from the Tokyo Stock Exchange; therefore, at the same time, it also resolved to withdraw the Plan.

In addition, the Target Company entered into an electric power purchase agreement with Tokyo Electric Power Company, Co., Ltd. in January 1998 and commenced 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; however, the agreement with Tokyo Electric Power Company, Co., Ltd. (current TEPCO Energy Partner, Incorporated) had expired at the end of March 2021. 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, 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, to 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. 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). 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, it believes that by effectively utilizing electricity generation facilities linked to the above-mentioned facilities, 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.

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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 owned 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 owned 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 owned 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.

1. Regarding the Previous Tender Offer

As described in the tender offer statement submitted by the Tender Offeror on December 16, 2020 (including the amended statements to the tender offer statement submitted by the Tender Offeror on December 21, 2020 and January 29, 2021), the Tender Offeror, based on the resolution at the board of directors meeting dated December 15, 2020, implemented a tender offer (with the purchase period set from December 16, 2020 to February 15, 2021, the purchase price per Target Company Share set at 2,450 yen (the "Previous Tender Offer Price"); the "Previous Tender Offer") as a part of the transaction aimed at acquiring all of the Target Company Shares (however, excluding the Target Company Shares owned by the Tender Offeror and treasury shares owned by the Target Company; hereinafter the same) and making the Target Company a wholly-owned subsidiary of the Tender Offeror (the "Previous Transaction"). However, as described in the tender offer statement submitted by the Tender Offeror on February 16, 2021, the Previous Tender Offer was unsuccessfully concluded because the total number of shares tendered in response to the Previous Tender Offer was 470,688 shares and did not reach the minimum planned purchase quantity (2,058,875 shares). The background leading to the implementation of the Previous Tender Offer is as described below.

When considering the Previous Transaction, 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 was on a gradual decrease due to the declining population and proliferation of eco-cars. This trend accelerated thereafter, and according to the

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