Shares in DuluxGroup have soared more than 27 per cent to a record high after its board backed a $3.8 billion acquisition proposal by Japanese paint giant Nippon.
The Australian paint and homeware company recommended on Wednesday its shareholders approve the scheme of arrangement with Nippon, which is valued at $9.80 per share in cash inclusive of a 15 cent per share interim dividend intended to be paid by Dulux.
Nippon's offer is at a 27.8 per cent premium to Dulux's closing price of $7.67 on Tuesday, and a 35.4 per cent premium to the three-month volume weighted average price of $7.24.
At 1045 AEST shares in DuluxGroup were 27.31 per cent higher at a record $9.765.
The deal is not expected to change the company's name in Australia and New Zealand, or its leadership, business portfolio, manufacturing and operations.
Dulux chairman Graeme Liebelt said he was confidence the new partnership would benefit both companies.
"The board has carefully considered the strategic options available to DuluxGroup to maximise value, including continuing to pursue domestic and global growth as a standalone company, and we have unanimously concluded that the transaction with Nippon is in the best interests of our shareholders," Mr Liebelt said.
Dulux's Australian and New Zealand businesses sell Dulux paints and coatings, Selley's and Parchem sealants, B&D Group garage doors, and Lincoln Sentry hardware.
In November the company announced it had lifted its full-year profit 5.4 per cent to $150.7 million.
Its revenue was up 3.3 per cent to $1.84 billion, though it was slowing as building materials suppliers face strong headwinds.
Nippon, which has operations in Asia, Europe and the US, generated about $7.8 billion in sales for the financial year ended December 31.
It has essentially no operations in Australia or New Zealand.
"Nippon intends to maintain the legacy developed by DuluxGroup and facilitate DuluxGroup's existing vision by leveraging the resources of the broader Nippon platform," Nippon president and chief executive Tetsushi Tado said on Wednesday.
