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Business deals

Singapore's Wuthelam to take control of Nippon Paint for $12bn

Deal marks first purchase of a Japanese materials company by an Asian buyer

Wuthelam will lift its stake to 55% from 39% through a private placement of shares, with plans to complete the purchase in January 2021.

TOKYO -- Singaporean paint conglomerate Wuthelam will acquire a majority stake in Nippon Paint Holdings, Japan's largest coatings maker, in a deal valued at roughly 1.3 trillion yen ($12.3 billion), according to a Nippon Paint announcement on Friday.

The announcement confirms Nikkei's report earlier on the deal. Wuthelam will lift its stake to 55% from 39% through a private placement of shares, with plans to complete the purchase in January 2021.

Wuthelam will keep Nippon Paint listed on the stock market. This will be the first major takeover of a Japanese materials company by a non-Japanese Asian buyer.

Nippon Paint will apply the proceeds from the deal toward taking full control of joint ventures overseeing the duo's Asian operations, up from the current roughly 50% stakes. The Japanese company also plans to acquire an Indonesian paint-making affiliate of Wuthelam.

Besides coatings, Wuthelam's business portfolio includes real estate and investment operations. The group paint segment brings in estimated annual revenue of around 200 billion yen.

Nippon Paint, strong in automotive and construction coatings, logged consolidated sales of 692 billion yen for 2019.

The collaboration between Wuthelam and Nippon Paint dates back to the 1960s. They developed the Asian market through joint-venture operations and have attained top shares in Malaysia and China, which accounts for around 30% of global demand.

In 2014, Wuthelam raised its stake in Nippon Paint to 38.9% from 14.5% to deepen their cooperative relationship.

Now Nippon Paint's Asian coatings business contributes 50% of consolidated sales and 70% of operating profit. With the Japanese market shrinking, Nippon Paint will accelerate overseas expansion under the auspices of Wuthelam, which boasts a vast network in Asia and elsewhere.

The global market for paints is estimated at 20 trillion yen, but could grow as large as 30 trillion yen. Demand is expected to climb in China and other parts of Asia, as well as in the Middle East, Africa and South America.

The sector is led by PPG Industries and Sherwin-Williams of the U.S., along with Dutch multinational AkzoNobel. The three together control about 30% of the global market. The Wuthelam-Nippon Paint alliance would come in fourth.

More than half of paint-making costs derive from oil-based raw materials. Because larger scales lend to lower procurement costs, the Big Three have been bulking up through acquisitions. Wuthelam and Nippon Paint plan to aggressively purchase targets to build up scale that will rival the larger competition.

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