Global New Materials International to acquire Merck pigments business

Pearlite pigment maker Global New Materials International is in talks to buy Merck's pigments unit, which is valued at €1 billion (HK $8.5 billion), Bloomberg reported, citing sources.

With a market value of about HK $5.3 billion (€622 million), less than the HK $8.5 billion market value of Merck's pigments unit, Global New Materials is reportedly exploring different financing options to support the merger. At the beginning of 2023, Global New Materials International issued convertible bonds with a total value of 300 million yuan, and at that time, it was also revealed that the proceeds would be used for future investment opportunities in the industry. The merger is still under discussion and has not yet been concluded, and other bidders are also interested in competing for Merck's pigments division.

According to the annual report of Global New Materials International 2022, as of December 31, 2022, the cash balance of the group was 1.882 billion yuan. Market capitalisation HK $5.3 billion. Global New Materials produces pigments including industrial coatings, plastics, textiles and leather, cosmetics, ceramics and automotive coatings. At the beginning of the year, Global New Materials International announced that it purchased about 42% of the shares of South Korean peer CQV, which is expected to be completed in the second quarter, which will provide opportunities for Global New Materials International and expand its business scope. In March, Global New Materials said it was studying acquisitions elsewhere, with mainland China accounting for 97.8 per cent of the group's revenue last year.

It is understood that in April 2023, Merck Group once again promoted the sale of its pigments business. Interested parties have until April 12 to submit non-binding offers. Potential buyers include specialist chemicals group Altana, Chinese manufacturers and some financial investors. But neither Merck nor Altana has said so. Back in November, Merck reached an agreement with Goldman Sachs to resume a $1.03 billion proxy agreement to sell its pigments business unit, which had been put on hold for some time because of the global coronavirus pandemic.

Back in November, Merck reached an agreement with Goldman Sachs to resume a $1.03 billion proxy agreement to sell its pigments business unit, which had been put on hold for some time because of the global coronavirus pandemic.

A resale plan for Merck's Effects pigments business, also known as its surface Solutions business, has so far received interest from Austrian rival Heubach, which, along with SK Capital Partners, completed its acquisition of Clariant's pigments unit in the first half of 2022. The previously disclosed transaction price was 805 million Swiss francs to 855 million Swiss francs (about 5.73 billion yuan to 6.08 billion yuan).

The main products of Merck's surface Solutions business are pearlescent pigments and metallic pigments, collectively known as effect pigment products, which are used in coatings, plastics and cosmetics, and are part of the Electronics segment. The business unit is valued at €1 billion (approximately $1.03 billion) and the pearlescent effect pigments business, which accounts for a significant portion of the total pigments business turnover, is expected to be sold in 2023 once global market conditions improve.

Reuters also quoted a source as saying that Merck's effect pigments business could be valued at more than 10 times its core revenue of 80-90 million euros.

It is reported that Merck Group is not in a hurry to sell the effect pigments business, because the business's current profit margin still has room to improve. Based on the acquisition cases in the pigments industry, it is expected that the acquisition price of the business should remain at the same level as DIC's purchase price of BASF's pigments business, which was sold for 1.15 billion euros in 2019.