Kansai gets greenlight
to takeover Freeworld
After a year of bitter opposition, a competition watchdog has approved Kansai Paint’s $260 million takeover bid of South Africa’s Freeworld Coatings. Currently ranked 34th in Coatings World’s Top Companies
Report, this deal represents a significant push into the continent for Japan’s
largest paint and coatings maker with $2.4 billion in sales revenue. The deal
could push them up a spot from their current standing as the ninth largest
paint maker in the world past Valspar into the number eight position.
However, the deal has not come without some stringent conditions. The
Competition Commission from the beginning said it was prepared to direct
how businesses should operate in South Africa to promote economic development when it imposed conditions on the buyout in the interest of competition and public concerns.
South Africa’s Department of Trade and Industry made a submission to the
commission asking that the takeover be prohibited on the grounds that the
paint market was highly concentrated, and it constituted a threat to the government’s localization drive.
The commission agreed with the department and gave the green light to the
transaction on the condition that Kansai divested the automotive coatings
business it operated in a joint venture with DuPont, as it would create a
“forum for collusion.”
According to the deal, Kansai must manufacture decorative coatings in
South Africa for 10 years; establish a manufacturing facility within five years
and invest in local research and development.
The commission said these conditions address any anticompetitive harm
that would have resulted from the merger and would ultimately increase South
Africa’s manufacturing capacity in the paint market.
Despite more than 90 percent of Freeworld shareholders indicating they
favored the takeover, the company had bitterly opposed the offer since Kansai made it in April last year.
TWRIGHT@RODPUB.COM
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