TOKYO (BLOOMBERG, REUTERS) - Nippon Paint Holdings, Japan's biggest paint maker, struck a 1.29 trillion yen (S$16.69 billion) deal to join with billionaire Goh Cheng Liang's Wuthelam Holdings, seeking to create a dominant paints and coatings company in Asia.
The deal involves Wuthelam taking a majority stake by buying new shares in Nippon Paint, which will use the bulk of the money to buy out their joint ventures in China, India, Malaysia, Singapore, South Korea and Thailand. Nippon Paint will also take over Wuthelam's wholly owned Indonesia business for about US$2 billion.
Wuthelam's stake in the Japanese company will rise to just under 60 per cent from 39 per cent one of the biggest transactions in Asia this year.
Wuthelam Holdings is a closely held paint and coatings maker. Its founder Goh Cheng Liang, 93, moved up this year to third place on Forbes' list of Singapore's richest as his net worth increased to US$14.8 billion from US$9.5 billion last year.
Nippon Paint has had ties with Wuthelam for more than 50 years. Mr Goh started making paints in a small factory in Singapore before he went on to partner with Nippon Paint in 1962, Forbes reported. His son, Hup Jin, was appointed chairman of Nippon Paint in March 2018 and also runs their privately held joint venture, Nipsea.
Although they operated the Nippon Paint South-East Asia Group, or Nipsea, together for years, Mr Goh began efforts in 2013 to gain majority control of the Japanese paint company. The new arrangement should streamline their corporate structure and make it more flexible, according to Bloomberg Intelligence analyst Horace Chan.
"The structure change is much anticipated and it was faster than my expectation," Mr Chan said. Because Nippon Paint has more control over Nipsea, minority shareholder interests should be protected even though Wuthelam will become a controlling shareholder of the Japanese paint maker, he added.
Mr Goh's stake in Nippon Paint via Wuthelam will eventually reach 58.7 per cent when the transaction closes in January according to Nomura Holdings, Nippon Paint's sole financial adviser in the transaction.
Nippon Paint will remain a listed company, chief executive officer Masaaki Tanaka said at a news conference.
The shares of Nippon Paint climbed 6.5 per cent by the close in Tokyo. The stock is up 51 per cent this year. The Nikkei newspaper first reported the news earlier, sparking the share rally.
Mr Goh and Nippon Paint decided to unify their Asian businesses to seek "more ambitious moves" to grow and deliver shareholder returns, they said in the statement.
"The many applications of paint include residential and commercial construction, transport applications such as cars and trains, and infrastructure such as bridges and roads, meaning that demand for paint grows in step with population growth and urbanization," Nippon Paint said, adding that these trends are strongest in Asia and are likely to deliver greater sales growth.
Most of the money from the deal will be kept within the broader organization, and Mr Tanaka said that mergers and acquisitions will be accelerated. Last year, Nippon paint bought Australia's Dulux Group for A$4 billion (S$3.9 billion) and Turkey's Betek Boya ve Kimya Sanayi.
"Asian companies are getting stronger and narrowing the competition gap with Japanese businesses," said Mitsushige Akino, senior executive officer at Ichiyoshi Asset Management Co. "There could be more consolidation in the basic materials space. Looking at it in terms of auto production, spreading into Asian countries makes sense."
