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TOKYO, July 11 (Reuters) - Talks between Japan's IdemitsuKosan Co and its founding family have failed toresolve an impasse over the oil refiner's proposal to buy rivalShowa Shell Sekiyu KK, both sides said.
The country's second-biggest refiner has argued that theacquisition is the best course of action in a shrinking domesticoil market, where five large and three small refiners compete.
But descendants of founder Sazo Idemitsu, includingoctogenarian son Shosuke Idemitsu -- a former president of thecompany and now honorary chairman -- have said the businessesare too different for a merger to work and they see no room forcompromise.
The family's 33.92 percent stake in Idemitsu Kosan is largeenough to veto the integration when presented for considerationat a shareholder meeting expected later this year.
The company is not considering issuing new shares to dilutethe family's ownership, Executive Vice President Daisuke Sekitold reporters, adding that it is not considering turning ShowaShell into a subsidiary and that it would try to convince thefamily that integration is the only choice.
On Monday Idemitsu Kosan President Takashi Tsukioka andcolleagues met family members including Shosuke Idemitsu and histwo sons to discuss the proposal, which could dilute thefamily's minority stake, the family's lawyer told reportersafter the talks.
He also said the parties had agreed to meet again, though nodate had been set.
The proposal opposed by the family includes Idemitsu Kosan'spurchase of 33.3 percent of Showa Shell Sekiyu from Royal DutchShell by the end of September.
(Reporting by Osamu Tsukimori, Taiga Uranaka and KentaroHamada; Editing by Christopher Cushing and David Goodman)
