TAGS: Automotive Coatings Architectural Coatings Industrial Coatings
Nippon Paint Holdings (NPHD) announces that the board of directors meeting approved the acquisition of shares of Nippon Paint (India) Private Limited (NPI) and Berger Nippon Paint Automotive Coatings Private Limited (BNPA), which are Indian-based paint manufacturers.
NPHD have entered into a master agreement and a share purchase agreement (the share transfer agreement) involving the acquisition. Pursuant to the acquisition, the shares of NPI will be acquired by NPHD and shares of BNPA by Nippon Paint Automotive Coatings (NPAC), a subsidiary of NPHD.
NPHD Pursues Maximization of Shareholder Value
The acquisition was carried out through the execution of call options which give NPHD the rights to buy back the target companies (NPI and BNPA) based on the master agreement that was signed with Isaac Newton Corporation (INC), which is a member of the Wuthelam Group (Wuthelam).
NPHD is pursuing Maximization of Shareholder Value (MSV) as its sole mission and is aiming for sustained growth based on Asset Assembler model for achieving MSV.
As stated in the August 10, 2021 announcement, NPHD decided to transfer the shares of three companies, namely, NPI, an India-based paint manufacturer engaged in the decorative paints, industrial coatings and automotive refinish coatings businesses to INC.
NPHD will also be transferring BNPA, which is an India-based automotive coatings manufacturer and Nippon Paint Automotive Europe GmbH (NPAE), which is a European-based automotive coatings manufacturer, to INC as NPHD had determined that fundamental restructuring of the businesses in India and Europe was necessary from a strategic perspective for improving the corporate value in the medium and long term.
The transaction has allowed NPHD to mitigate risks by having Wuthelam Group bear additional investments and expenses required for the restructuring plan of these companies in the short term and the uncertainty of the restructuring plan.
Strategic Marketing Investments in Decorative Paints Business
While mitigating risks through the share transfer of the three companies, NPHD has continually provided administrative and other management support services through its Group even after the share transfer without changing names of these companies based on the agreements with INC.
The Group has seconded management teams to the three companies and monitored business operations by keeping track of financial position and other operating status.
As a result, NPI has achieved stronger growth faster than anticipated at the time of share transfer to INC, driven by the recovery of the Indian market from the pandemic, market share gains due to drastic strategic marketing investments in the decorative paints business, notably in the Tamil Nadu state and the Karnataka state in southern India, customer wins in the industrial coatings business, as well as the market recovery and additional acquisitions in the auto refinish business.
Achieving Sustainable Revenue Growth & Profitability
In addition, BNPA returned to a positive operating profit in FY2022, which is earlier than anticipated at the time of share transfer to INC, due to a change of management structure, unified operations with NPI including system integration, profitability improvements by reviewing raw material procurement and manufacturing costs, corrections in selling price in response to escalating raw material price and the recovery of the automotive market in India.
Considering these, NPHD have determined that NPI and BNPA will be able to achieve sustainable revenue growth and profitability without significant investments in the future. As a result, NPHD have concluded that exercising the call options at this time would be the optimal decision from the perspective of MSV. NPAE will continue to pursue restructuring and turnaround under the Wuthelam Group.
For exercising the call options, NPHD has newly obtained a stock valuation report by a third-party valuator independent from NPHD, Wuthelam Group and the target companies, with the aim of ensuring the fairness of transaction. The acquisition price of the target companies has been determined based on the stock valuation thus obtained. More details are available on Nippon Paint Holdings’ official website.
Source: Nippon Paint Holdings