Global paint maker Nippon Paint is buying U.S. based chemical producer AOC for $2.3bn. Lone Star Fund XI will sell AOC holding company, LSF11 A5 TopCo, to the Tokyo listed holding company owned mainly by Singapore billionaire Goh Cheng Liang. Thus, after this statement, share price of Nippon Paint expanded to a 14% mark, which indicates that investors are expecting a lot out of this deal.
The Academic Case for the Acquisition
Global paint maker Nippon Paint is buying U.S. based chemical producer AOC for $2.3 billion. Lone Star Fund XI will sell AOC holding company, LSF11 A5 TopCo, to the Tokyo listed holding company owned mainly by Singapore billionaire Goh Cheng Liang. Thus, after this statement, share price of Nippon Paint expanded to a 14% mark, which indicates that investors are expecting a lot out of this deal.
Comparison of the two firms can be well explained by the following key product categories of AOC; protective coatings for water pipes and fuel tanks by 28%, composite formulations for structural panels by 27% and colorants and adhesives for automotive and marine use by 24%. AOC realized $528 million EBITDA in 2023, and Nippon Paint expects the demand for AOC’s solutions to further grow in the next few years due to increasing EV manufacturing and renewable power across the world.
Special Linkages between Finance and Operations
Nippon Paint will use debt to fund the acquisition and one of the core competencies that has made AOC suitable for acquisition is its customer base and technological strength especially in offering product differentiation at high end level. From this acquisition, Nippon Paint is likely to gain ideas and options on how to follow up with AOC’s supply network and transport services to augment product distribution and escalation of productivity in North America and Europe. This acquisition is the latest in Nippon Paints’ efforts towards striving to be a one-stop-solution provider of coating as well as specialty chemical products.
Check out Ownership and Market Potential of AOC.
The Chinese electronics firm AOC was purchased in 2021 by Texas-based Lone Star Funds which as established by John Grayken. The acquisition of AOC by Nippon Paint also strengthens the company’s dominance in the specialty chemical industry leading to growing prospects for new markets. The ascent of global requirements of specialty products used in renewable energy and vehicles is also a great reason why Nippon Paint proceeded to acquire a company like AOC.
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