Super big mergers and acquisitions in the chemical industry

The Japanese paint industry leader, Nippon Paint (Nippon Paint) Holding Co., Ltd. recently announced that it will implement a third-party private placement, which will be fully subscribed by the Singapore paint giant Wu Denan Group. The total purchase amount is about 1.3 trillion yen (about 85 billion yuan).

Wu Denan Group is the largest shareholder of Japan Paint Holdings. After the capital increase, the proportion of shares with voting rights will rise from the current 39.5% to 58.7%. It is planned to complete the acquisition on January 1 next year.

Nippon Paint Holdings will acquire the joint venture business with the Wu Denan Group in Asian countries and the Wu Denan Group's Indonesian business. At the same time, new shares were issued to Wu Denan Group as consideration for the acquisition. As a result, Wu Denan Group will withdraw from the coating business.

Through this transaction, Japan Coatings Holdings has undertaken the coating business of Wu Denan Group. Japan Coatings Holdings stated that it is considering acquiring a joint venture with Wu Denan Group to enhance its presence in the Asian market. In view of the expansion of the new crown epidemic, the development of antiviral coatings has also been included in the field of vision.

This acquisition is the first time an Asian company has acquired a large Japanese raw material company, and it will also be one of the largest cross-border transactions in Asia this year.

Nippon Paint has a history of cooperation with Wu Denan for more than 50 years. In 2014, Wu Denan Group increased its investment in Japan Paint Holdings from 14.5% to 38.9%, and has been deepening the cooperative relationship.

Nippon Paint's consolidated financial report for fiscal year 2019 showed sales of 692 billion yen and net profit of 36.7 billion yen. Through the acquisition of the Asian business, it is expected that net profit will increase by about 60%.

PPG Industrial Group of the United States, Sherwin-Williams of the United States and Akzo Nobel of the Netherlands are the top three in the coatings industry, with a total share of 30% worldwide. Wu Denan Holdings and Japan Coatings Holdings Alliance ranked fourth in terms of share, but in terms of operating income, only about half of the top PPG.

However, this transaction is still subject to the approval of relevant business regulatory authorities in various regions. Nippon Paint's share price surged 6.5% after the news was reported, to 8,490 yen at the close of the Tokyo stock market.