Dulux, the biggest paint manufacturer in Australia could soon be purchased by a Japanese company if shareholders accept their offer. Dulux Group announced that they have entered into a Scheme Implementation Deed with Nippon Paint Holdings. Nippon proposed to purchase entire Dulux, through a scheme for a $9.80 per share.
According to the offer, the value of Dulux is $3.8 billion. The amount that Nippon proposes to pay per share is 27.8 per cent higher than $7.67, which was the closing price of Dulux share on April 16 (one day before the offer was announced to the public). The offer is also 35.4 per cent higher than the three-month average price of Dulux shares, which is $7.24. The shareholders could benefit from the sale since the value of the share has tripled since Dulux split with Orica in 2010. At the time, one share of the company was priced at $2.50.
Nippon is a leader in paints and coatings market, with $7.8 billion in worldwide sales last calendar year. They are operating in the US, Europe and Asia. If the deal goes through, Dulux would be a separate division of the company. Also, it would get to keep its name, factories, leadership team and Melbourne headquarters.
Nippon stated that Dulux could benefit from the merger, since it could grow as a brand while providing more opportunities for their staff and management. Kim Carr, opposition senator, said that representatives from Dulux said to him that the change of ownership will have no impact on research and development, manufacturing and jobs in Australia.
Earlier, Dulux stated that they are focusing on Dulux, Parchem and Selleys businesses in New Zealand and Australia. Furthermore, they also want to increase earnings and seek opportunities in new markets. The company expects the construction market profits to lower, however this shouldn’t have any effect on them since 70 per cent of all its business is related to renovation or repair of existing structures.
The Dulux board released a statement, recommending its shareholders to accept the proposal from Nippon, stating that the acquisition multiples and the premium offered are attractive.
Graeme Liebelt, DuluxGroup Chairman, said that the board of the company carefully considered all options to increase value and growth, and they have come to the conclusion that accepting the offer from Nippon is in the best interest for the shareholders. They will have the opportunity to realise a premium to the market value of the shares. He said that Nippon complimented the team, performance and capability of DuluxGroup.
The Dulux board plans to pay a fully franked interim dividend of up to $0.15 per share, and one or more fully franked special dividends, which will be a total of $0.26 per share. The company is still planning when the payment of the dividends will be carried out, but they will post an update when they determine the date.
Shareholders will vote in June on offer, however, the whole deal has to be also approved by the court. If everything goes as planned, the takeover should start in August.