A Global Specialty Formulator, AOC, to be Acquired by Nippon Paint Holdings

Nippon Paint Holdings Co., Ltd. (NPHD) announces that it has entered into a purchase agreement under which NPHD has agreed to acquire all of the equity interests of LSF11 A5 TopCo LLC and its subsidiaries (AOC), which is a specialty formulator operating primarily in the United States and Europe, to make it a subsidiary of NPHD.

NPHD's Board of Directors voted during its meeting on September 26, 2024, to delegate decision-making on the signing of the Purchase Agreement to both Representative Executive Officers and Co-Presidents of NPHD. Given that all prerequisites have been completed, NPHD has decided to officially sign the Purchase Agreement on October 28, 2024.

Reasons for Acquisition

Nippon Paint Group ( the "Group") pursues Maximization of Shareholder Value (MSV) as its main purpose, using its Asset Assembler model. They will accomplish this aim by compounding EPS (earnings per share) via both organic growth, driven by the development of existing companies, and inorganic growth, achieved through excellent and low-risk mergers and acquisitions without regard for geographies, business sectors, or sizes. Furthermore, they aim to increase PER (price-to-earnings ratio) by improving capital market knowledge and assessments.

AOC has established a leading position in the US and European markets as a specialty formulator for CASE, colorants, and composite solutions, owing to its diverse customer base, which includes areas with significant growth potential, advanced technological capabilities that enable high-level product customization tailored to customer needs, and flexible logistics network. Furthermore, the firm has great cash generating capabilities, which are fueled by strong profitability and modest capital expenditure needs.

By joining the Group, AOC is intended to contribute to the long-term compounding of EPS (earnings per share) and support the expansion of existing businesses via cooperation with group firms.

The acquisition is anticipated to add to EPS growth in the first year. NPHD intends to fund the acquisition using debt and will not use equity financing.

Expected Acquisition Closing Date

The Acquisition is planned to close in the first half of 2025. As a consequence, NPHD anticipates the acquisition to have no major effect on its profits in the fiscal year ending December 31, 2024.

Due to the duration needed for securing relevant clearances from Indian regulatory authorities, all shares of AOC India Pvt Ltd will be temporarily moved outside of AOC Group until the Acquisition closes. However, once the required permits are secured, AOC Group aims to swiftly repurchase all shares of AOC India Pvt Ltd.

BofA Securities Japan Co., Ltd. served as lead financial adviser, Mizuho Securities Co., Ltd. as financial advisor, and Davis Polk & Wardwell LLP as legal advisor.

Source: Nippon Paint Holdings