Malaysian rubber glove manufacturer Top Glove has announced plans to acquire two plants in a US$9.06million (RM39 million) deal as part of its efforts to achieve 30% global market share from the current level of 25%.
Analysts say the deal will give the world’s largest rubber glove producer greater access to China.While the company didn’t provide operational details, analysts including UOB Kay Hian’s Lester Chin and Kenanga Investment Bank’s Raymond Choo said the factories could together crank out up to two billion glove pieces a year. About half of sales from those two factories go to China, Chin and Choo noted.
Kenanga’s Choo said the acquisitions amplify the company’s commitment towards fulfilling its goal of growing organically via acquisitions. He also said the acquisitions will give Top Glove bigger and direct access to China.
Top Glove has been seeking acquisitions on top of organic growth as part of its ambitious target to increase its global market share. The company currently operates more than two dozen factories that produce as much as 48 billion pieces of gloves annually.
By December next year, the company could operate 28 factories with 632 production lines with a capacity of up to 60 billion pieces of gloves a year, Top Glove had said in March.
The proposed acquisitions, deemed related-party transactions as the company would be buying the assets from relatives of Top Glove Chairman Lim Wee Chai, includes glove manufacturing and trading business as well as “customers’ particulars and other related information,” Top Glove said.
That could “further strengthen its presence and market share in developing countries, particularly China,” the company added.
The projected revenue and profit contribution arising from both factories stand at RM150 million and RM3 million respectively, or about 5.2% and 0.8% of Top Glove’s revenue and net profit respectively in fiscal 2016, said UOB’s Chin.
“We are fairly positive on the proposed acquisition as an effective customer acquisition strategy against the backdrop of industry consolidation and would allow Top Glove to grow its existing capacity and customer base in a quicker manner,” he added.