In the next few years, mergers and acquisitions will continue to be the development trend of the paint industry. Well-known foreign companies will continue to enter the Chinese paint market and occupy more front-line markets.
Akzo Noble plans to acquire Buimen (ICI) for 8.1 billion pounds (16.1 billion US dollars), which will cause drastic changes in the paint and coating industry. In this global $76 billion market, the eleven largest companies currently account for 53% of the total. The acquisition can significantly expand its foothold, enter high-growth regions, and further expand its gap between being a global leader and a competitor. These opponents are facing new challenges. This involves finding suitable candidate targets for integration in this increasingly concentrated market to maintain their competitiveness.
In recent years, large-scale paint producers have focused their attention on acquiring medium-sized companies, or companies with annual sales of $1-3 billion. However, the paint and coating industry is very frequent in mergers and acquisitions, and such suitable targets have almost disappeared. There are few highly mature markets in Europe and the United States.
This has led big manufacturers to turn their attention to smaller companies that do not have a big impact on their business performance, or special-purpose companies that have specialized technology and production lines to improve their product mix. These are not attractive enough compared to Aksu’s purchase of Bu Nei Men, but large companies will continue to follow this growth strategy.
There is no doubt that the North American and European markets will continue to integrate, but they only grow by 3% and 4% each year. For these big manufacturers, this is far from enough. After defending their existing "sites", if they want to achieve long-term development, they must use various resources to expand into other emerging and fast-growing markets.
In all regions of the world, Asia is the fastest growing region, with China leading the way. Analysts believe that the paint market in China is growing at a rate of 12% per year. The average annual growth of Chinese architectural coatings exceeds 10%, and the market value is approximately US$10 billion. The demand for powder coatings increased by 13-15% annually. The strong demand has driven a considerable amount of M&A and capacity expansion here last year. This includes Aksu’s acquisition of the remaining equity of Great Wall Coatings, a joint venture company, from Great Wall Securities, which resulted in full control of the company, which means that it has taken control of all powder coating businesses in mainland China, Taiwan and Hong Kong; SigmaKalon agreed to have an 85% stake in a joint venture with China's decorative paint company, Shanghai Ivy Chemicals; Valspar bought architectural paint for $290 million in August last year. 80% of the shares of the manufacturer China Resources Coating.
Aksu recently commissioned a decorative paint facility in Langfang to expand production in China. The device is increasing the number of paint installations in China to 15. In 2006, Akzo’s sales in China (excluding the peeling pharmaceutical business) reached US$800 million, of which 75% came from paint. The company also said that it intends to build a wood lacquer installation in Vietnam, considering it is located in Ho Chi Minh City.
Other companies also have moves. Jotun, Norway, is investing US$37 million in South Korea’s Busan to construct a 40 million litre/year marine and protective paint installation, which is expected to be completed in January 2009.
DuPont’s core business has been in North America and Western Europe, but company officials stated that “we must work hard to develop fewer regions in Asia and Eastern Europe.â€
Obviously, major manufacturers are trying their best to expand into emerging markets, especially the fastest-growing ones in Asia. Among these, China is a very important region that will attract competition from many manufacturers. It can be imagined that the giants of the paint and coating industry will shift the focus of market competition from the mature markets in Europe and the United States to a rapidly developing Asia market with unlimited potential. China will be an important battlefield.
Akzo Noble plans to acquire Buimen (ICI) for 8.1 billion pounds (16.1 billion US dollars), which will cause drastic changes in the paint and coating industry. In this global $76 billion market, the eleven largest companies currently account for 53% of the total. The acquisition can significantly expand its foothold, enter high-growth regions, and further expand its gap between being a global leader and a competitor. These opponents are facing new challenges. This involves finding suitable candidate targets for integration in this increasingly concentrated market to maintain their competitiveness.
In recent years, large-scale paint producers have focused their attention on acquiring medium-sized companies, or companies with annual sales of $1-3 billion. However, the paint and coating industry is very frequent in mergers and acquisitions, and such suitable targets have almost disappeared. There are few highly mature markets in Europe and the United States.
This has led big manufacturers to turn their attention to smaller companies that do not have a big impact on their business performance, or special-purpose companies that have specialized technology and production lines to improve their product mix. These are not attractive enough compared to Aksu’s purchase of Bu Nei Men, but large companies will continue to follow this growth strategy.
There is no doubt that the North American and European markets will continue to integrate, but they only grow by 3% and 4% each year. For these big manufacturers, this is far from enough. After defending their existing "sites", if they want to achieve long-term development, they must use various resources to expand into other emerging and fast-growing markets.
In all regions of the world, Asia is the fastest growing region, with China leading the way. Analysts believe that the paint market in China is growing at a rate of 12% per year. The average annual growth of Chinese architectural coatings exceeds 10%, and the market value is approximately US$10 billion. The demand for powder coatings increased by 13-15% annually. The strong demand has driven a considerable amount of M&A and capacity expansion here last year. This includes Aksu’s acquisition of the remaining equity of Great Wall Coatings, a joint venture company, from Great Wall Securities, which resulted in full control of the company, which means that it has taken control of all powder coating businesses in mainland China, Taiwan and Hong Kong; SigmaKalon agreed to have an 85% stake in a joint venture with China's decorative paint company, Shanghai Ivy Chemicals; Valspar bought architectural paint for $290 million in August last year. 80% of the shares of the manufacturer China Resources Coating.
Aksu recently commissioned a decorative paint facility in Langfang to expand production in China. The device is increasing the number of paint installations in China to 15. In 2006, Akzo’s sales in China (excluding the peeling pharmaceutical business) reached US$800 million, of which 75% came from paint. The company also said that it intends to build a wood lacquer installation in Vietnam, considering it is located in Ho Chi Minh City.
Other companies also have moves. Jotun, Norway, is investing US$37 million in South Korea’s Busan to construct a 40 million litre/year marine and protective paint installation, which is expected to be completed in January 2009.
DuPont’s core business has been in North America and Western Europe, but company officials stated that “we must work hard to develop fewer regions in Asia and Eastern Europe.â€
Obviously, major manufacturers are trying their best to expand into emerging markets, especially the fastest-growing ones in Asia. Among these, China is a very important region that will attract competition from many manufacturers. It can be imagined that the giants of the paint and coating industry will shift the focus of market competition from the mature markets in Europe and the United States to a rapidly developing Asia market with unlimited potential. China will be an important battlefield.
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