Pledge to expand through acquisitions into one of the top three coatings groups
Japan’s Kansai Paint has agreed to buy three east African paint companies to tap into one of the world’s fastest-growing regions as part of its global expansion.
The company’s South African subsidiary Kansai Plascon Africa is to acquire Sadolin Kenya, Sadolin Uganda and Sadolin Tanzania, although it would not reveal how much the deal would be worth. But people with knowledge of the purchases said it was the largest corporate acquisition in east Africa for more than two years.
Estimated 2016 combined revenues at the east African companies, which are owned by a conglomerate of regionally based families, were $87m. Kansai Plascon’s estimated 2016 revenues were R4.1bn ($309m). The three companies pay royalties to the Sadolin Group, owned by Dutch multinational Akzo Nobel, to use the name.
Amid slowing growth in Japan, Hiroshi Ishino, president of the Tokyo-listed Kansai Paint since 2013, has promised to expand the company through acquisitions into one of the top three coatings groups in the world.
Farid Masood, chief executive of Kansai Plascon, said the company was “very optimistic on the African growth story”.
“We’re looking at Africa’s growing middle class, increased infrastructure spending and the paint business is relevant across all sectors,” he said. “Yes, there will be short-term hiccups but we’re in for the long haul.”
The purchases are part of Kansai’s strategy to diversify away from auto-coating and into areas such as paints for trains and industrial machinery, which are strong growth areas in emerging economies. It acquired Austria’s Helios Group for $613m last year.
Kansai tried to buy the three east African companies several years ago but the attempt got “lost in translation”, according to one person with knowledge of the deal. Mr Masood said he “reignited Kansai’s interest” when he took charge of Kansai Plascon last August.
Mr Masood said Kansai Plascon had also opened a business in Nigeria. “We plan to use this as a platform to expand into Ghana, Senegal and elsewhere in west Africa,” he said.
The acquisition comes as Shinzo Abe, Japan’s prime minister, looks to raise Japan’s profile in Africa, particularly in the face of increasing Chinese competition. He led a business delegation to Nairobi last year for a Japan-Africa conference and promised tens of billions of dollars of investment.
Aly-Khan Satchu, an investment consultant in Nairobi, predicted “more of this kind of activity” in the region. “A lot of family-owned businesses have maxed out and need investment to take them to the next level,” he said.
Citi acted as financial adviser to Kansai Plascon.
Additional reporting by Leo Lewis in Tokyo