Nippon Paint Holdings (NPHD) is announcing that the Board of Directors meeting approved on August 29, 2023 the acquisition of shares of Nippon Paint (India) Private Limited (NPI) and Berger Nippon Paint Automotive Coatings Private Limited (BNPA, and collectively with NPI), which are Indian-based paint manufacturers.

NHPD has entered into a Master Agreement and a Share Purchase Agreement involving the acquisition yesterday. Pursuant to the acquisition, the shares of NPI will be acquired by NPHD and shares of BNPA by Nippon Paint Automotive Coatings Co., Ltd. (NPAC), a subsidiary of NPHD.

The acquisition was carried out through the execution of call options which give NPHD the rights to buy back the Target Companies based on the Master Agreement that was signed with Isaac Newton Corporation (INC), which is a member of the Wuthelam Group, its parent company and Goh Hup Jin, persons substantively controlled by Wuthelam, its parent company, and Mr. Goh Hup Jin, and subsidiaries of Wuthelam but excludes NPHD and its subsidiaries.

Reasons for the acquisition of shares　

NPHD is pursuing Maximization of Shareholder Value (MSV) as its sole mission, and are aiming for sustained growth based on Asset Assembler model for achieving MSV.

As stated in the August 10, 2021 Announcement, we decided to transfer the shares of three companies, namely, NPI, an India-based paint manufacturer engaged in the decorative paints, industrial coatings and automotive refinish coatings businesses, BNPA, which is an India-based automotive coatings manufacturer, and Nippon Paint Automotive Europe GmbH (NPAE), which is a European-based automotive coatings manufacturer, to INC (the transfer of NPI and BNPA shall be referred hereinafter as the “Share Transfer (2021)”) as we had determined that fundamental restructuring of the businesses in India and Europe was necessary from a strategic perspective for improving the corporate value in the medium and long term.

This transaction has allowed us to mitigate risks by having Wuthelam Group bear additional investments and expenses required for the restructuring plan of these companies in the short term and the uncertainty of the restructuring plan.

While mitigating risks through the share transfer of the three companies, NPHD has continually provided administrative and other management support services through its Group even after the share transfer without changing names of these companies based on the agreements with INC. The Group has seconded management teams to the three companies and monitored business operations by keeping track of financial position and other operating status.

As a result, NPI has achieved stronger growth faster than anticipated at the time of share transfer to INC, driven by the recovery of the Indian market from the pandemic, market share gains due to drastic strategic marketing investments in the decorative paints business, notably in the Tamil Nadu state and the Karnataka state in southern India, customer wins in the industrial coatings business, as well as the market recovery and additional acquisitions in the auto refinish business.

In addition, BNPA returned to a positive operating profit in FY2022, which is earlier than anticipated at the time of share transfer to INC, due to a change of management structure, unified operations with NPI including system integration, profitability improvements by reviewing raw material procurement and manufacturing costs, corrections in selling price in response to escalating raw material price and the recovery of the automotive market in India. BNPA is expected to continue to achieve strong growth in FY2023 and afterwards.

Considering these, we have determined that NPI and BNPA will be able to achieve sustainable revenue growth and profitability without significant investments in the future. As a result, we have concluded that exercising the call options at this time would be the optimal decision from the perspective of MSV.

NPAE will continue to pursue restructuring and turnaround under the Wuthelam Group.