M&A deal in Malaysia Part 2_2021

1. In the previous issue, we introduced Ability Center’s M&A deal for a Malaysian staffing company in January 2021. This time, we would like to introduce the acquisition of shares in a Malaysian adhesive manufacturer by Aica Kogyo in February 2021.

2 Aica Kogyo’s acquisition of a Malaysian adhesive manufacturer

(1) Aica Kogyo aggressively pursuing M&A in Asia Headquartered in Nagoya, Aichi Prefecture, Aica Kogyo is a listed company on the First Section of the Tokyo Stock Exchange and the Nagoya Stock Exchange with annual sales of approximately 190 billion Japanese yen. It is engaged in the chemical products segment, including adhesives, and the construction materials segment, mainly melamine laminates. In particular, the company boasts the top position in melamine decorative laminates in Japan.

In Malaysia, Aica has two group companies, Aica Malaysia, a subsidiary that manufactures and sells industrial resins, adhesives for plywood, and resins for fiberboards, and Maica Laminates Sdn Bhd, an affiliate company Aica invested in 1999. Aica has been proactively expanding to Asia and increasing its production and sales bases through M&A. According to the Aica Group’s corporate profile, the company conducted two M&A projects in Vietnam in 2020, three projects in China and Hong Kong in 2019, one project in Japan in 2019, and one project each in Taiwan and Thailand in 2018. As a result, Aica’s overseas sales account for 40% of the group’s total sales. The company’s stock price had been hovering around 1,000 yen until 2010, but as of March 26 2021, it rose to 4,235 yen with a market capitalization of 280 billion yen as investors had favourable views toward the company’s aggressive global expansion.

(2) ADTEC, a Malaysian hot melt adhesive manufacturer and seller According to Aica Kogyo’s press release dated February 24, 2021, ADTEC has a hot melt adhesive manufacturing plant in Malaysia, which produces hot melt adhesives for sanitary materials, glue sticks for DIY, pellets for industrial use, etc., and is developing its business channels in about 50 countries around the world.

The business results of ADTEC for the past three years are as follows (calculated at an exchange rate of 1 Malaysian Ringgit (MR) = 26.1 yen).

Fiscal year ending
December 2017
Fiscal year ending
December 2018
Fiscal year ending
December 2019
Equity56 million MR
(1.46 billion yen)
47 million MR
(1.22 billion yen)
57 million MR
(1.48 billion yen)
Total assets90 million MR
(2.34 billion yen)
67 million MR
(1.74 billion yen)
69 million MR
(1.8 billion yen)
Sales141 million MR
(3.68 billion yen)
118 million MR
(3.07 billion yen)
112 million MR
(2.92 billion yen)
Operating profits14 million MR
(360 million yen)
13 million MR
(330 million yen)
9 million MR
(230 million yen)

(3) Transaction scheme

Aica Kogyo plans to acquire 70% of the outstanding shares of ADTEC from two of ADTEC’s major shareholders. According to the press release, the acquisition price will be US$28 million (approximately 2.95 billion yen) plus adjustments. If the consideration for 100% of the shares is US$28 million, it would be 12.8 times more than the company’s operating income of 230 million yen for the fiscal year ending December 31, 2019, and if the consideration for 70% of the shares is US$28 million, it would be 18.3 times more than the same operating income. On the other hand, comparing to the average operating income of approximately 310 million yen for the three years from 2017 to 2019, the figure is 9.5 times if the consideration is for 100% and 13.6 times if the consideration is for 70%.

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