Nippon Paint prepares for deal spree in $150bn coatings trade

Nippon Paint is gathering firepower for a worldwide deal spree and can assume a central position within the consolidation of a $150bn world trade hit exhausting by the coronavirus, stated its chief govt. 

A recent acquisition drive by Nippon Paint would come on the heels of a $12bn cope with its largest shareholder — a non-public firm based by one in every of Singapore’s richest billionaires — that can mix two of Asia’s largest paints and coatings teams right into a regional titan.

To prepared itself for a possible flurry of mergers and acquisitions, Nippon Paint stated on Thursday it might restructure its worldwide automotive coatings operations right into a single unit higher capable of soak up new corporations as they’re acquired.

Like others within the sector, Nippon Paint has been pressured by Covid-19 as the worldwide shutdown of automobile factories hit its automotive paint enterprise, inflicting a 19 per cent year-on-year fall in internet revenue for the primary six months of the yr.

We’ll in fact contemplate launching M&A

However in an interview with the Monetary Occasions, the Japanese group’s chief govt Masaaki Tanaka stated that the disaster supplied alternatives it could not have had in any other case. The extreme downturn, he stated, supplied an opportunity for Nippon Paint to make strategic world acquisitions throughout a nonetheless fragmented paints trade. 

“When your entire market is down, there will probably be trade realignment alternatives for a corporation like us with monetary firepower and steady administration since there will probably be gamers that will probably be troublesome to outlive on their very own,” added Mr Tanaka. “We’ll in fact contemplate launching M&A.” 

Mr Tanaka, the previous deputy president of Mitsubishi UFJ Monetary Group who headed the financial institution’s US operations, engineered a fancy cope with Singapore’s Wuthelam Holdings, its largest shareholder. Beneath the settlement Nippon Paint will problem new shares to Wuthelam, the paints enterprise based by 93-year-old Goh Cheng Liang that has already constructed a 39.6 per cent stake within the Japanese group. 

Beneficial

The $12.2bn third-party share allotment will by January increase Wuthelam’s stake in Nippon Paint to 58.7 per cent of excellent shares, constructing on a 50-year relationship below which the Singaporean group has steadily elevated its stake and brought an lively position in its strategic route. 

In a round deal construction, the vast majority of funds raised from the share issuance will probably be deployed by Nippon Paint to purchase out a collection of Asian joint ventures it has established over time with Mr Goh’s firm. The deal will embrace the Japanese group’s acquisition of Wuthelam’s wholly owned enterprise in Indonesia for $2bn.

Final yr, Nippon Paint paid greater than $3bn for paint-makers in Australia and Turkey.

Since saying the tie-up with Wuthelam on August 21, Nippon Paint shares have risen 36 per cent, earlier this week hitting their highest degree since their itemizing in 1949.