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Asian Paints to Acquire Controlling Stake in Berger International Ltd, Singapore

Published on 2002-09-06. Author : SpecialChem

Acquisition will expand Asian Paints' operations to 23 countries across the globe

Thursday September 5, 2002: Asian Paints (India) Limited, India's largest paint company has announced today at the Singapore Stock exchange that it has offered to acquire controlling stake in BERGER INTERNATIONAL LIMITED (BIL), a holding company incorporated in Singapore. The company has no operations in India.

BIL has operations in 11 countries, covering China, South east Asia, the Middle East and the Caribbean Islands. BIL has paint manufacturing facilities in all these countries. This is Asian Paints largest acquisition in overseas markets and will expand the company's operations to 23 countries across the globe.

Asian Paints has received approval from the Securities Industries Council (SIC) of Singapore for a 'Partial General Offer'(PGO) to acquire 50.1 % stake in the paid up equity capital of BIL. The largest shareholder, Ariza Holdings Ltd, which holds 56.77% stake in the company, has undertaken to offer its holdings to Asian Paints and hence the PGO is expected to be successful. (See note 'Details of the acquisition') The investment will be made by Asian Paints (India) Limited.

After the acquisition, Asian Paints will rank amongst the top 10 decorative coatings companies in the world. It is probably also for the first time that an Indian company has made an open offer on the Singapore stock exchange.

Commenting on the acquisition, Mr. Ashwin Dani, Vice Chairman & Managing Director, Asian Paints (India) Limited stated "In line with our vision of becoming a leading player in emerging markets, Berger International Limited offers access to the high growth emerging markets. Most of the countries that BIL operates in were on our radar screen and we believe that there is tremendous scope for Asian Paints to add value in these markets. Asian Paints has been operating in overseas markets for nearly 25 years and the company has built a good model for its international operations particularly for emerging markets. Access to China and South East Asian markets will give it an opportunity to tap the fastest growing paint markets in the world." He further stated "Asian Paints expertise in the areas of product development, marketing, supply chain management and manufacturing will significantly add value to all these markets".

Commenting on the funding of the acquisition, he stated "Better working capital management and low capital expenditure has resulted in consistent free cash flows for the company. The cash flows and low debt of the company will comfortably help finance the acquisition."

Details of the acquisition

The open offer on the Singapore stock exchange will be made for 50.1% stake in the company amounting to around 52 million shares at an offer price of S$ 0.40 per share. This will result in an outflow of S$ 20.8 million or INR 576 million. The investment will be made by Asian Paints (India) Ltd. The offer will be made to all the shareholders to purchase 50.1% stake in the company. Ariza Holdings Ltd holds 56.77 % stake in the company while the balance is held by the other shareholders. Ariza Holdings Ltd has given Asian Paints an 'Irrevocable undertaking' to participate fully in the Partial General Offer(PGO). Thus Asian Paints has secured the 'Partial General Offer' by this 'Irrevocable Undertaking" from Ariza Holdings Ltd. This ensures that Asian Paints will have management control over Berger International Limited.

Berger International Limited

Berger International Limited (BIL) has operations in 11 countries that include China, Singapore, Thailand, Malaysia, Myanmar, Bahrain, Malta, United Arab Emirates (UAE), Jamaica, Barbados and Trinidad & Tobago. Besides, it holds 30% stake in Dutch Boy Philippines Incorporated, a Philippines based company.

Berger is a well-recognised company in paints since 1760. The company originated in the United Kingdom and in the late 1980s, all its operations outside UK were sold to the United Breweries(UB) group. The UB group sold the companies in India, Bangladesh, Nigeria and East Africa to local businessmen. In 1994, the operations in Singapore, Middle East, Malta and the Caribbean Islands were grouped under a holding company named Berger International Limited (BIL) and was listed on the Singapore Stock Exchange. The current promoters of BIL are businessmen based in Malaysia who purchased controlling stake from the UB group in 1996. Ariza Holdings Ltd holds 56.77 % stake in the company.

BIL is the largest paint company in Bahrain, Jamaica, Malta, Barbados and Trinidad & Tobago. It is a significant player in the United Arab Emirates(UAE) and strong in protective coatings in Singapore. The company in the mid-1990s expanded its operations to China, Myanmar and Malaysia - It is yet to achieve significant presence in these countries.

For the year 2001, Berger International Limited's worldwide sales were S$ 115 million (INR 3220 million).

Strengths of Berger International Limited and Scope for Asian Paints

Berger is a strong brand in most of the countries in which it operates and is reckoned as a global coatings company. The acquisition will give Asian Paints access to 11 manufacturing facilities that will have a combined capacity of around 50,000 MT. BIL has strengths in protective, industrial and marine coatings. It has good manufacturing facilities, proper systems and sound policies instituted for the smooth functioning of the company.

Middle East & Malta

In the Middle East, BIL operates in Bahrain & Dubai. In Bahrain & Malta, BIL is the largest paint company. The combined sales of these units constitute around 27 % value sales of BIL in 2001. The operations in the Middle East are cash-positive and also contribute positively to the company's bottom-line. Malta is also a profitable subsidiary and has good margins.

Caribbean Islands

In the Caribbean Islands, BIL operates in Barbados, Jamaica and Trinidad & Tobago. BIL is the market leader in all these countries. The combined sales of these units constituted 47% value sales of BIL in 2001. These units are very profitable and have excellent margins.

South-East Asia & China

BIL operates in this region through Singapore, Thailand, Myanmar, Malaysia and China. Besides these countries, BIL holds 30 % stake in Dutch Boy Philippines Incorporated. All these units contribute around 26% value sales of BIL in 2001. In the mid-1990s, BIL began operations in China, Myanmar and Malaysia. Since these are recent additions, BIL is yet to get a foothold in these markets.

Scope for Asian Paints

Asian Paints can expand product range in all these countries particularly in the area of decorative coatings. It has the opportunity to strengthen its retail presence in all these markets through product introductions and network expansion, which will be some of the key drivers for growth. APIL has considerable expertise in these areas.

In South East Asia & China, Asian Paints gets access to some of the fastest growing paint markets in the world. New product introductions, improvement in working capital, better overhead management etc. should enable growth for Asian Paints.

All these countries provide vast potential for Asian Paints.

Asian Paints is India's largest paint company with a turnover of Rs 16.56 billion (around US$ 340 million). The company sells over 200,000 MT of paint annually and will be ranked after this acquisition amongst the top 10 decorative coatings companies in the world. It is also India's largest exporter of paints, exporting to 22 markets in the Asia-Pacific region, the Middle East, and Africa. The company has eleven joint venture units in countries of Fiji, Tonga, Solomon Islands, Vanuatu, Australia, Nepal, Sri Lanka, Oman, Mauritius, Egypt and Bangladesh. It is the market leader in six countries including India.

Source: Asian Paints


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