On February 7, 2025, DAI NIPPON TORYO Co., Ltd. (DNT) announced that the company, based on a board resolution held on February 6, 2025, decided to make a tender offer to acquire the shares of Shinto Paint Co Ltd. Shinto Paint, a company listed on the Tokyo Stock Exchange. If DNT completes the payment for this third-party allotment, DNT will hold 50.10% of Shinto Paint' shares post-increase and become its controlling shareholder. On February 6, 2025, DNT signed a memorandum with Shinto Paint. This transaction is not intended to delist Shinto Paint.
The tender offer aims to acquire a maximum of 15.52 million shares (before increase: 50.10%, after increase: 45.58%), with an offer price of 90 yen per share, representing a 36.17% discount from the closing price of 141 yen per share on February 5, 2025, on the Tokyo Stock Exchange’s Standard Market. The total acquisition price is approximately 1.4 billion yen (about 68 million RMB), and the total transaction amount, including various expenses, is expected to be around 1.8 billion yen (about 87 million RMB). DNT stated that due to Shinto Paint' current performance and market environment, it is difficult to acquire shares at a market price or with a premium over the market price.
According to the board resolution on February 6, 2025, the offeror will acquire shares of the target company listed on the Tokyo Stock Exchange’s Standard Market, making the target company a subsidiary of the offeror. The implementation of the tender offer and other preconditions are subject to the completion of a third-party allotment. If the transaction is fully implemented, the offeror will hold 50.10% of the target company's shares post-capital increase. This transaction does not intend to delist the target company's shares.
DNT, founded on July 25, 1929, listed its shares on the Tokyo and Osaka Stock Exchanges in May 1949. The company mainly engages in the R&D, production, and sales of coatings, lighting equipment, fluorescent materials, and other products, as well as logistics and other services related to its business activities. DNT has five business segments: domestic coatings, overseas coatings, lighting equipment, fluorescent materials, and others. As of now, DNT consists of the offeror, 21 subsidiaries, and one affiliated company.
On May 16, 2024, DNT Group announced its mid-term business plan for 2024-2026, with consolidated sales of 80 billion yen and operating profit of 8 billion yen. DNT is working to achieve this goal. Furthermore, to expand its coatings business foundation, DNT’s strategy includes acquiring and utilizing external resources in addition to internal growth.
Shinto Paint, founded in 1901, listed its shares on the Osaka Stock Exchange in June 1951. As of now, Shinto Paint Group consists of the target company, 7 subsidiaries, 6 affiliates, and 1 other affiliated company, and mainly engages in the manufacturing and sale of coatings and chemical products. Shinto Paint' core policy is to provide high-quality, high-functionality, and environmentally friendly coatings products, materials, and services backed by high technological levels, through a customer-oriented organization.
Shinto Paint stated that although the domestic coatings market is expected to continue shrinking slowly, the company had to release an announcement on April 28, 2022, about improper conduct related to its water supply-use ductile iron pipe resin coatings (for pipeline use), resulting in a loss of trust from business partners. The company is working on restoring this trust, and its 2023-2025 mid-term business plan does not prioritize increasing sales but focuses on gradually improving its business environment, with restoring customer trust as the top priority.
Shinto Paint further stated that it will continue to focus on coatings design and manufacturing technology as the core of its business development, aiming to provide safe and reliable products as its primary task, and will use data to improve yield rates and standardize operations. The company is committed to three core policies: improving productivity through organizational simplification, and increasing profitability by exploring cooperation opportunities with other companies in the same industry. Despite improvements in operating profit in fiscal year 2023, the results were still far below the initial target. For fiscal year 2024, further rationalization measures, including advancing productivity-enhancing steps by one year, will be implemented to improve management. Shinto Paint is determined to achieve operating surplus at all costs.
DNT Group expects to achieve consolidated sales of 100 billion yen by the 2029 fiscal year, which marks the company’s 100th anniversary. DNT is considering a mid-term business plan with a target of 100 billion yen in sales and 10 billion yen in operating profit, as part of "Vision 2029." Assuming the acquisition of Shinto Paint, DNT expects sales and operating profits to increase, which led to the consideration of acquiring Shinto Paint’ shares starting in late January 2024. In mid-March 2024, DNT was required to submit a letter of intent for the acquisition of target shares, which was submitted on April 24, 2024, as a non-binding letter of intent.
DNT gave two reasons for acquiring Shinto Paint as a subsidiary:
1) The acquisition is expected to increase DNT Group's sales and operating income, contributing to the target of 100 billion yen in consolidated sales and 10 billion yen in operating profit in the 2029 Vision, in line with the basic policy of expanding the coatings business foundation through the acquisition of external resources.
2) By acquiring Shinto Paint, DNT will be able to secure combined production capacity with the target company, making it easier to make new investment decisions, including equipment integration, and is expected to improve coatings production efficiency. Due to Shinto Paint' current operating performance (with the domestic coatings market in a mature stage and expected stable demand, but no significant growth), DNT decided to acquire Shinto Paint shares at a price below the market price.
DNT believes that the transaction will achieve the following synergies:
1) Increased sales opportunities and cost reductions through collaboration in coatings business. Both DNT and Shinto Paint have offered coatings in various fields of the domestic market. Through this transaction, their coatings businesses will form an alliance, (a) complementing each other in the architectural coatings and powder coatings fields, leading to a diversified product lineup, and (b) achieving competitive pricing through joint procurement of raw materials. This is expected to enable DNT to supply coatings that meet customer needs at competitive prices. Additionally, through collaboration in quality management, costs are expected to be reduced.
2) Increased productivity through new capital investment. Both DNT and Shinto Paint have aging production equipment, and the domestic coatings market is in a mature stage, making it difficult to expect significant expansion. In such a competitive environment, DNT believes that securing combined production capacity with Shinto Paint will make it easier to make new investment decisions and improve production efficiency, especially considering equipment integration.
It is reported that DNT's growth strategy formulated for this transaction has been recognized for its usefulness and feasibility in increasing Shinto Paint' value. Furthermore, to achieve synergies through cooperation with the acquirer, Shinto Paint is considering measures to meet new customer demands for electrodeposition coatings and plans to invest 300 million yen in production equipment. For other coatings, investments in production equipment totaling 80 million yen are planned, with specific investment guidelines to be determined after consultation with the acquirer.
