Paint and homeware company DuluxGroup (ASX: DLX) has entered into a scheme implementation deed with Japanese paint firm Nippon Paint which places a $3.8 billion valuation on Dulux.
Under the deal, Nippon Paint will acquire 100% of DuluxGroup shares at $9.80 each through a scheme of arrangement inclusive of a 15% interim dividend to shareholders.
The cash price represents a 27.8% premium to DuluxGroup’s closing price of $7.67 on 16 April 2019 and a 32.7% premium to the one-month volume weighted average price of $7.39.
DuluxGroup’s board has endorsed the offer, recommending shareholders approve the acquisition.
“The board has carefully considered the strategic options available to DuluxGroup to maximise value, including continuing to pursue domestic and global growth as a standalone company, and we have unanimously concluded that the transaction with Nippon Paint is in the best interests of our shareholders,” DuluxGroup chairman Graeme Liebel said.
“It provides an opportunity for shareholders to realise a significant premium to market value for their shares and is on terms that reflect the strategic value of DuluxGroup to Nippon Paint.”
In addition to securing court and shareholder approval, the deal requires the approval of the Australian Foreign Investment Review Board and the New Zealand Overseas Investment Office.
No changes are expected to the DuluxGroup leadership, business portfolio, manufacturing and operations, while the company’s name in Australia and New Zealand will remain the same.
Acquisition to provide growth and scale
DuluxGroup expects the acquisition will lead to two “world class companies” with complementary geographic market exposures. The deal is set to provide increased opportunity for DuluxGroup to pursue its growth ambitions, leveraging Nippon Paint’s global scale and resources.
DuluxGroup’s Australian and New Zealand businesses sell paints and coatings, B&D Group garage doors, and Lincoln Sentry hardware. The company employs approximately 4,000 people in Australia, New Zealand, Papua New Guinea, South East Asia, China and the United Kingdom.
Meanwhile, Nippon Paint is considered a global leader in the paints and coatings industry and generated approximately $7.8 billion in sales for the financial year ended 31 December 2018.
Nippon Paint president and chief executive officer Tetsushi Tado said the company was excited by the prospect of welcoming DuluxGroup into Nippon Paint.
“The combination of DuluxGroup and Nippon Paint will provide further avenues of growth for DuluxGroup and create exciting opportunities for all of the DuluxGroup management team and employees,” he said.
“Nippon Paint intends to maintain the legacy developed by DuluxGroup and facilitate DuluxGroup’s existing vision by leveraging the resources of the broader Nippon Paint platform.”
Nippon Paint expects to fund the cash consideration through a new committed debt acquisition facility, with the scheme not conditional on Nippon Paint securing funds.
Investors reacted positively to the acquisition news, with DuluxGroup’s shares soaring 26.8% to $9.73 in late morning trade.