Japan’s Kansai bids $262 million for SAfrica Freeworld

By David Dolan

JOHANNESBURG (BestGrowthStock) – Japan’s Kansai Paint (4613.T: ) offered to buy all the shares it does not own in South Africa’s Freeworld Coatings, a $262 million bid that could potentially lead to a hostile takeover.

Osaka-based Kansai said in a statement on Monday it would offer 12 rand per share for the 72.4 percent stake in Freeworld (FWDJ.J: ) it does not already own.

The price represents a 17 percent premium to Freeworld’s closing price of 10.25 rand on Friday.

The deal would give Kansai, which has operations in 18 countries, a foothold in South Africa and an opportunity to expand on the fast-growing continent.

Kansai, currently Freeworld’s top shareholder, said several attempts to communicate with the board of the South African firm had been unsuccessful. Freeworld has said ownership by Kansai would raise competition-related concerns.

“As a consequence of the reluctance of the Freeworld board to engage, Kansai believes that Freeworld’s shareholders be given the opportunity to consider … the offer, and has therefore decided to proceed with the offer without the co-operation of the Freeworld board,” Kansai said in a statement.

Freeworld in June rejected a takeover bid from private equity firm Brait (BATJ.J: ) of 10.45 rand per share.

Shares of Freeworld surged 11.3 percent to 11.41 rand as of 1323 GMT.

“If the board members can’t get a say in what they actually want, there’s a chance that this deal might not go ahead, and I guess that’s where the concern is,” said Mitchell Gannaway, a trader at Thebe Securities.

IRREVOCABLE AGREEMENT

A Freeworld spokesman said the company would be issuing a statement in the near future and would be able to comment then.

The deal would be worth nearly 1.8 billion rand ($262 million) and would value Freeworld at around 2.4 billion rand, according to Reuters calculations.

Reuters reported in October that Kansai had become the top shareholder in Freeworld and was in talks to raise that to at least a majority stake, citing people familiar with the matter.

The Japanese company, one of the world’s 10 largest paint firms, said it had secured irrevocable agreements to accept or recommend the offer from fund managers representing 58.4 percent of the target shares.

The Public Investment Corporation, South Africa’s influential government pension fund which owns 6.43 percent of Freeworld shares, gave an irrevocable agreement to recommend the offer to its clients, Kansai said.

Saddled with a moribund economy and aging population at home, many Japanese firms are desperate to find growth overseas. They have historically focused on emerging markets in Asia.

Acquisitions by Japanese firms in South Africa total $2.9 billion this year, according to Thomson Reuters data, making it the biggest target for Japanese M&A after the United States.

Kansai’s bid follows Nippon Telegraph and Telephone Corp’s (9432.T: ) $3.2 billion bid for South African IT firm Dimension Data (DDTJ.J: ) (DDT.L: ) in July.

($1=6.866 Rand)

(Editing by David Cowell and David Hulmes)

Japan’s Kansai bids $262 million for SAfrica Freeworld