* Regulatory review taking longer than expected
* Regulator busy with review of JX-Tonen merger - NHK
* Showa takeover complicated by spat with Idemitsu family (Adds Shell comment)
By Taiga Uranaka
TOKYO, Sept 7 (Reuters) - Japanese refiner Idemitsu Kosan Co has postponed its acquisition of Showa Shell Sekiyu shares as regulatory approval is taking longer thanexpected - a delay that comes amid uncertain prospects for thedeal due to a spat with the Idemitsu founding family.
Idemitsu management now expects to purchase its stake fromRoyal Dutch Shell in October or November instead ofthis month.
Public broadcaster NHK reported the review by Japan's FairTrade Commission was taking time as it is also reviewing anothermerger in the sector - the planned takeover of TonenGeneralSekiyu KK by JX Holdings Inc.
A Fair Trade Commission spokesman declined to comment.
In July last year, Idemitsu Kosan agreed to buy a 33.3percent stake for about 170 billion yen ($1.7 billion), withplans to buy the rest of Showa Shell shares with a share swap ata later date.
As with the JX-Tonen deal, the government has been keen forthe sector to consolidate as demand for gasoline in Japan hasbeen on the decline due to a shrinking population.
The Idemitsu family, which claims to control enough votes toveto the deal, has argued the company's close connection to Iranmakes a merger with Showa Shell, which has close ties to SaudiArabia, difficult. Analysts say the family, which owns just overa third of Idemitsu, is more likely concerned that its stake inthe company would be diluted.
The founding family has moved to block the deal bypurchasing a 0.1 percent stake in Showa Shell, sufficient tocomplicate any takeover as it raises the prospect that Idemitsuwould, contrary to current plans, have to make an expensivetender offer for Showa Shell shares.
With the family's purchase, Showa Shell holdings owned byIdemitsu and related parties would exceed a third. By law,Idemitsu management would have to launch a takeover bid on theopen market that would attract other shareholders eager to sellat the agreed price of 1,350 yen - more than 50 percent higherthan the current price.
Idemitsu said on Wednesday that it and Showa Shell stillplanned to launch their combined company on April 1 next year.Previously it has said it aims to resolve the dispute with thefounding family through talks.
A Shell spokesman said: "Shell is committed to selling themajority of its shareholding in Showa Shell, as agreed withIdemitsu in July 2015. We trust that regulatory approval will begranted swiftly so that the transaction can be completed, inaccordance with all legal requirements, soon."
"Separately, we remain supportive of the proposed mergerbetween Idemitsu and Showa Shell," the spokesman said.
To get round any requirement that Idemitsu might have tomake a general offer for all Showa Shell shares, Idemitsumanagement is looking at possibly cutting the size of the stakeit plans to purchase from Royal Dutch Shell, a person withdirect knowledge of the matter has told Reuters.
Idemitsu has declined to comment on that possibility. (Reporting by Taiga Uranaka; Additional reporting by OsamuTsukimori and Ron Bousso; Editing by Edwina Gibbs and MarkPotter)
