Nippon Sheet Glass Co. (NSG), the world“s sixth-largest glass maker, will move into joint first place with Asahi Glass Co., in terms of sales, after the JPY 616 billion acquisition by the end of June…
Nippon Sheet Glass Co. (NSG), the world“s sixth-largest glass maker, will move into joint first place with Asahi Glass Co., in terms of sales, after the JPY 616 billion acquisition by the end of June 2006 of third-ranked UK glass maker Pilkington PLC. The acquisition will raise NSG“s annual sales to about JPY 760 billion, or 14% of the world share, rivaling Asahi Glass. Saint-Gobain of France will go down to third place, followed by Guardian Industries Corp. and PPG of the USA, Vitro of Mexico and Central Glass Co. of Japan. NSG President Katsuji Fujimoto, 62, said his company could repay the JPY 140 billion it had borrowed for the acquisition in several years. He also said NSG would boost its glass business to turn around the company“s electronic information business. With soft domestic demand for glass products for buildings and automobiles, the market will inevitably contract in the future, but worldwide demand, including that in developing countries, will continue to increase, according to Fujimoto. “NSG“s four main production bases are in Japan, Vietnam and Malaysia, but Pilkington has 27 production bases in 16 countries, including those in the United States and China. We“ve wanted to acquire Pilkington since taking a 20% stake in the company in 2001”, Fujimoto said. NSG paid about JPY 616 billion, or over JPY 30 billion more than the initial bid, for the acquisition, but Fujimoto believes the price was right despite the fact that it was about 30% higher than the actual price of the UK company“s shares. “Many experts said we would have difficulties in procuring funds for the acquisition. We borrowed JPY 140 billion, but we can repay the loans in several years as revenues would increase after the acquisition”, he said. The complete takeover of Pilkington will boost NSG“s production in China as it can supply quality glass from Pilkington“s factories there to local plants producing Japanese vehicles in China, including Toyota Motor Corp., according to Fujimoto. “Pilkington also has a factory in Russia, which is close to a Toyota plant currently under construction”, he said. Fujimoto plans to boost the quality of Pilkington“s production, as Japanese automobile makers are seen as the most demanding in the world. “They don“t even allow tiny warps. As a result, only Japanese makers can fully meet their demands. After the acquisition, NSG will dispatch engineers to Pilkington factories to improve quality as soon as possible, which will also boost Japanese automakers“ quality”, he said. NSG incurred huge losses in its electronic information business, but Fujimoto has no intention of disposing of the business. “Based on the experience I“ve learned from being in charge of the electronic business, it“s a field that changes drastically and can impact on the company“s entire performance. In order to do business in this new field, our company has to improve the foundation of the conventional glass business to stabilize the electronic information business”, he said. NSG has not removed electronic information from its growth strategy, Fujimoto said. “NSG“s rivals have gained an edge in making glass for plasma displays, but IT technology changes drastically over time. NSG can turn around this business with its next-generation products if it doesn“t cut corners in development and accumulates basic technology”, he said. The acquisition of Pilkington will produce a synergy effect as NSG can extend its expertise in production, such as reducing the defect rate and improving operational rates and quality for foreign employees, Fujimoto said. “Pilkington, on the other hand, is good at creating new technology. NSG will first use Pilkington“s new technology that melts glass with oxygen. Our company will reduce the use of crude oil and natural gas to cut carbon dioxide emissions by 25% to 30%”, he said. Fujimoto dismissed the possibility of a merger of the two firms for the present because of Pilkington“s high brand value. “We“re considering putting the two firms under a holding company”, he said. It will be a challenge for NSG to manage a company with a 180-year history, almost a century longer than NSG has been in existence, but Fujimoto said he would ask the current Pilkington management to stay on and make an effort to fuse the two firms. “I“ll travel to the factories around the world to talk with employees there. Friction is expected, but I“ll try to get constructive opinions from them”, he said.