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Reclusive Singapore billionaire's gloss is too good for Dulux to refuse

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17.04.2019

As one of the best-performing companies within the S&P/ASX100 since its demerger from Orica nearly a decade ago, Dulux Group probably never expected to be a willing takeover target. Then along came an offer far too good to be refused.

While Dulux's board and management, having just celebrated the company's centenary last year, might have preferred to remain independent, the $9.80 a share offer (plus up to 17.5 cents per share of franking credits) was just too attractive to resist.

Dulux has agreed to a $3.8 billion takeover bid from Nippon Paint.Credit:Suzanne Plunkett

Nippon Paint's $3.8 billion offer reflects an enterprise value of $4.2 billion and a multiple of earnings before interest, tax, depreciation and amortisation (EBITDA) of 16.1 times, believed to be the highest-ever enterprise value-to-EBITDA multiple ever paid within the global paints industry. On a price-to-earnings basis, it is 25.3 times last year’s earnings.

The offer represents a 30 per cent premium over Dulux’s closing price ahead of the offer and a 35.4 per cent premium to its three month volume-weighted average price. It compares with the $2.50 a share level at which Dulux shares first traded when it listed in 2010.

Underscoring the stretched nature of the offer’s valuation of Dulux there are - unlike the 2017 $US11.3 billion ($15.8 billion) acquisition of Valspar by Sherwin-Williams that formed the world’s largest paints group - no meaningful in-market synergies from a Nippon........

© Brisbane Times