Kitz Corporation announced that it has entered into a share purchase agreement with Unimech Group Berhad, Malaysian major valve manufacturer and distributor headquartered in Penang, and has reached a basic agreement on a capital-and-business alliance as follows.
Background of Capital and Business Alliance
In 4th Med-Term Management Plan (FY2019-2021), which has already started, Kitz is working to expand its business with the goal of “Aiming for Global Strong No. 2” in the valve manufacturing business.
In overseas markets, Kitz has set up new sales / marketing bases in countries around the Asean with the key goal of “full-scale entry into the middle-class (volume) zone of the Asian region.”
However, as sales of Kitz/Toyo brand products are mainly for the high-end market at this moment, Kitz considers developing new brand products and establishing new sales channels as possible new strategies.
On the other hand, as a major Malaysian valve manufacturer and distributor, Unimech has a broad sales network and procurement capabilities, mainly in the Asean and China region. It has strengths, particularly in light industries such as the palm oil industry in Malaysia and Indonesia, centered on Arita brand-name products.
Kitz believes that building equity relationships with Unimech, combining the Kitz Group’s technological/manufacturing capabilities, the Unimech Group’s sales/marketing capabilities, and the brands of both companies, and effectively complementing each other’s management resources, will lead to an increase in the corporate value of both groups, as well as to an increase in the convenience of end users who use our products.
The content of the Capital Alliance
Kitz plan to acquire 37,551,132 shares of common stock (25.1% of the total outstanding shares) at 1.65 RM per share for a total of approximately 61.9 million RM (approximately 1.56 billion yen).
The content of the Business Alliance
• Create synergy by leveraging Unimech’s purchasing and marketing capabilities, as well as our design-development, quality-control, and manufacturing technologies.
• Expand market shares by building Kitz/Toyo and Arita brand portfolios in the Asian region and developing promising markets jointly.
• Sales channels will be mutually utilized to expand sales of both companies’ products.
• Utilize Unimech’s logistics and services.
• Considering the possibility to establish a joint venture company.