DuluxGroup Limited (ASX: DLX) is involved in the operations of manufacturing and marketing of premium branded decorative paints, protective, texture and industrial coatings, etc. DuluxGroup protects and improves the infrastructure, and since 1932, the group is providing the protective coatings for Sydney Harbour Bridge.
The group today, on 17th April 2019, announced that it has entered into a Scheme Implementation Deed with Nippon, under which Nippon proposes to acquire 100% of DuluxGroup’s shares for $9.80 by way of a Scheme of Arrangement.
The cash price of $9.80 represents 27.8% premium to DuluxGroup’s closing price of $7.67 on 16 April 2019, a 32.7% premium to the one-month VWAP of $7.39 and a 35.4% premium to the three-month VWAP of $7.24. The implied acquisition multiples are 16.1x FY18 EV/EBITDA, 18.6x FY18 EV/EBIT and 25.3x FY18 P/E.
Nippon remained a global leader in the paints and coatings industry and generated approximately A$7.8 billion in sales for the financial year ended 31 December 2018. The group has operations in Asia, Europe and the US, but fundamentally, no operations in New Zealand and Australia.
DLX Board has intentions to declare and pay a fully franked interim dividend of up to $0.15 per share in respect of the six months ended 31 March 2019, subject to finalisation of the interim results of the company. It also intends one or more fully franked special dividends, totalling in aggregate up to $0.26 per share. The company is considering the timing of the payment of the special dividends and will provide an update related to this after the finalisation of its interim results. The cash amount of the interim and special dividends would reduce the cash price of $9.80 per share.
The Chairman of the company, Mr. Graeme Liebelt said that the Board is very careful in considering the strategic options available to the company for maximising value, including continuing to pursue domestic and global growth as a standalone company, and it has unanimously concluded that the transaction with Nippon is in the best interest of the shareholders of the company.
The shareholders will be offered the opportunity to get a significant premium to market value for their shares, and the terms are reflective of the strategic value of DuluxGroup to Nippon. Nippon complimented the team of DuluxGroup, their capability, high-quality businesses and track record of the performance, all of which they want to maintain in the future. The Chairman is confident that the new partnership will be strongly beneficial to both the companies.
On the price-performance front, the stock of DuluxGroup Limited, (on 17th April 2019, AEST 02:50 PM), was trading at $9.770, an increase of 27.379% during the day’s trade with a market capitalisation of ~$2.99 billion. The stock has generated a YTD return of 18.73% and returns of 4.35%, 14.65% and 2.95% over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $9.870, and 52-week low price stands at $6.310, with an average trading volume of ~1.14 million.
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