Chemical company ICI will represent its Dulux brand directly in southern Africa
British chemicals group ICI is including southern Africa in its directly owned global Dulux paint empire by buying its local representative, JSE-listed AECI, for R745million.
ICI said southern Africa's expanding economy and rapidly growing construction market resulted in Dulux's sales in this region growing by 19percent to R774million last year.
The local operation's trading profits were R70million, net assets were R249million and the business employed 650 people, which included 400 in South African employees.
The deal includes buying AECI in Botswana, Malawi, Namibia, Swaziland and Zambia.
The British chemicals multinational said expanding in developing markets is a key part of its strategy to accelerate profit growth.
Developing markets already account for a about a third of ICI's sales, and the rate of growth in these markets averages three times global gross domestic product growth.
ICI chief executive John McAdam said: "Dulux gives ICI a strong presence in southern Africa. We are delighted with this acquisition as it is absolutely consistent with our focus on fast growing developing markets."
AECI said the sale forms part of the local chemical group's strategy to focus on the mining and manufacturing sectors.
The Dulux business, which targets primarily the retail consumer market, is not well aligned with this strategy.
"ICI's global expertise in marketing, technology and procurement, among other capabilities, is expected to accelerate the profitable growth of the regional Dulux business and to bring significant benefit to its people," AECI said.
The deal will take effect on October 1. AECI said it expects the company's net gain from the deal to be about R500million, which will be used to fund major capital projects and potential acquisitions.
Southern Africa is the only region besides Australia where ICI does not represent its Dulux brand directly