First Paint Buys Red Lion: A Story of Snake Swallowing Elephant      

First Paint Manufacturing (Beijing) Co., Ltd. (First Paint) announced it has completed the acquisition of Beijing Red Lion Coatings Co., Ltd. (Red Lion) at a press conference in Beijing on February 22nd.
   "This is so far the significant acquisition deal in China's coating sector in terms of Chinese brands," said Li Yongwu, president of China Petroleum and Chemical Industry Association. "It means a lot to China's coatings market, half of which is now occupied by foreign brands."
    State-owned Red Lion is a large-scale integrated coatings company with a history of more than 200 years. It started in the Qing Dynasty, and registered the Red Lion brand in 1962.
   As a brand, Red Lion had been awarded as China Top Brand. The company had been the top ranking in China's coatings sector for six consecutive years in terms of comprehensive strength, and been included in the Top China 500 Companies for three consecutive years.
   Its new plant is in Tongzhou District, Beijing, capable of producing auto coatings, industrial coatings, coil coatings, decorative coatings, emulsion coatings as well as coating resins, along with facilities for research and development and quality control.
   However, Red Lion were in the red since 1996 because of poor management and outdated technology, gradually losing its leadership in China's coatings industry. The company, which once produced 30 000 tons of coatings a year, now sets the production target of only 12 000 tons per year.
   First Paint, the privately-owned firm established in 1995, focuses on the R & D, manufacture and sales of construction coatings and is committed to saving energy in construction sector. The fast-growing First Paint has emerged as a leading player in domestic coatings industry by participating in the draft of national standards on energy-saving of coatings and construction sectors. Even so, First Paint still lagged behind Red Lion, which enjoyed greater fame home and abroad for its impressive history. Thereby, First Paint's takeover of Red Lion is viewed as a snake swallowing an elephant by many industry people.
   "The success of the deal may rely on our capability and sincerity", said First Paint Chairman Guo Xiang'en." We will retain Red Lion as a brand, and aim to revive the national brand by introducing advanced management versions."
    "We want to create a leading coatings player in China through the acquisition. And that's why First Paint bought Red Lion," Mr. Guo said. "We will turn Red Lion back into its core business - coatings."
   And the deal is believed to go to affect China's coatings industry, made up of a large number of companies, usually small in scale, across the nation. Foreign coatings giants have rushed into the Chinese market by building plants and acquiring domestic factories.
   Almost every one in the world's coatings industry believes that China's market must grow on the back of its fast growing demand for construction coatings, auto coatings, industrial coatings, powder coatings and furniture coatings, and anticipates the integration is inevitable for the Chinese coatings market.
    First Paint acquiring Red Lion not only sets an example for pushing technology innovation and resource integration in the domestic coatings industry, but also helps increase competitiveness of domestic coatings brands and diversify players in the domestic coatings market.