Wuthelam Acquired Majority Share in Nippon Paint for $12 Billion Deal
On Friday, August 21, 2020, the leading Japanese paint company, Nippon Paint Holdings Co. Ltd. (Nippon Paint) announced that Singapore-based Wuthelam Group (Wuthelam) has acquired a majority share of the former company by spending $12.18 billion (1.285 trillion yen). Under the deal, the existing share of Wuthelam in Nippon Paint will rise to nearly 60% from 39%, which will make the group as the majority shareholder.
Nippon Paint and Wuthelam have been working together for almost 60 years in various fields and are currently operating joint ventures in Asian countries including China, Singapore, and Malaysia. The Singaporean paint conglomerate has started its vision for owning the majority shares of the Japanese paint company since 2013.
Wuthelam and its Collaboration with Nippon Paint
Wuthelam Group is a privately held paint and coatings maker founded by Goh Cheng Liang (93), who recently gained his ranking to the third place on Forbes’ list of Singapore’s richest since his net worth soared to $14.8 billion this year from $9.5 billion in the last year.
As per the statement released by the Japanese company on Friday, the first collaboration between the two paint companies was established in 1962 and started a joint venture in Singapore with the aim of expanding its paint business in the Asia region. With the growing influence of Wuthelam in the Japanese company, Goh Hup Jin (son of Goh Cheng Liang) was appointed as the chairman of Nippon Paint in March 2018 and also is currently running their privately held joint venture, Nipsea.
The deal is expected to close in January 2021 with the regulatory approvals. According to Nomura Holdings, Nippon Paint’s sole financial adviser in the transaction, Goh’s stake in Nippon Paint via Wuthelam will eventually reach 58.7% upon the completion of the agreement. The deal became one of the biggest transactions in Asia this year, and following the announcement of the deal, Nippon Paint had surged to 6.5% in a near-flat broader market. The deal was conducted with Nomura as the advisor for Nippon Paint while Wuthelam was guided by Bank of America.
Nippon’s Expansion and Strategy
Masaaki Tanaka, the chief executive officer (CEO) of Nippon Paint said in a statement on Friday that the Japanese firm would continue enlisted in the trading stock exchange since Wuthelam decided to supply the growing demand for paints through the former company. Meanwhile, the Japanese firm further stressed that it would continue pursuing more M&A deals as additional capital is required to enhance its financial base for future growth.
Meanwhile, the chief financial officer (CFO) of Nippon Paint, Yuichiro Wakatsuki said the deal would “strengthen its balance sheet… result in a 0.6 % increase in profit margins and earnings per share growth of over 10%.” With the deal, the Japanese firm plans to use some portion of the money to buy out Wuthelam from their Asian joint ventures in China, Malaysia, and Thailand, as well as acquire Wuthelam’s wholly-owned business in Indonesia. Last year, it acquired Australia’s top paint maker DuluxGroup Ltd. with a deal close to $3 billion.
Currently, the Japanese firm is planning to expand its presence outside its mature domestic market and focusing on the emerging markets in the Asian region. The firm explained, “Asia is becoming a key region for the company’s sustainable growth in terms of both market size and growth rate due to its projected demographic and economic growth leading to increasing demand,” According to the Nippon Paint’s website, Asia represents a key market, which accounts for 52% of its revenue, as compared with 26% for domestic markets (Japan).