TOKYO: Singapore's Wuthelam Group will take majority control of Nippon Paint Holdings, spending 1.19 trillion yen (S$15.6 billion) to raise its stake to just under 60 per cent from 39 per cent now, the Japanese company said in a statement on Friday (Aug 21).
Wuthelam will become a majority shareholder through the deal, which is one of Asia's largest cross-border transactions in 2020.
Nippon Paint said they first began collaborating with Wuthelam Group in 1962 when it was appointed as its sales agent for the Asia region.
This was later followed by joint ventures with the Wuthelam Group in Thailand, Malaysia, China and other Asian countries.
Despite this close collaboration in a wide range of other business areas for almost 60 years, Nippon Paint said in a statement on Friday that more ambitious moves are necessary for it to enhance its financial base for future growth.
The 139-year-old Japanese firm is seeking growth outside its mature domestic market, and has prioritised global expansion. Last year, it acquired Australia's top paint maker DuluxGroup Ltd in a near US$3 billion deal.
Asia is Nippon Paint's most important market and accounts for 52% of its revenue, compared with 26% for Japan, according to the company's website.
The company may pursue more M&A deals should it need additional capital, Nippon Paint said during a conference call.
"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," Nippon Paint said in a statement.
Yuichiro Wakatsuki, chief financial officer of Nippon Paint Holdings, said the deal with Wuthelam would "strengthen its balance sheet", and was expected to result in a 0.6 per cent increase in profit margins and earnings per share growth of more than 10 per cent.
The Japanese firm will remain listed, and its top shareholder Wuthelam will not sell the company, said Masaaki Tanaka, chief executive officer of Nippon Paint Holdings.
The firm noted growing demand for paint in applications including residential and commercial construction, and infrastructure such as bridges and roads.
It said it expects the deal to be finalised in January, and that it will need to be cleared by regulators in each of the markets where the businesses operate.
Nippon Paint was advised by Nomura and Wuthelam worked with Bank of America.
Editor's note: This story has been updated after Reuters corrected the valuation of the buy out of Nippon Paint by Wuthelam Group.