Responses to Investor and User Concerns Regarding Global New Materials International’s Acquisition of Merck’s Surface Treatment Business

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2024-07-27

Response to Investor and User Concerns Regarding Global New Materials International’s Acquisition of Merck’s Surface‑Treatment Business In recent years, the pearlescent pigment industry has undergone significant changes: first, Titan Yang Chemical acquired BASF; then, Global New Materials purchased shares in CQV; most recently, Global New Materials has acquired Merck’s surface‑treatment business, with pearlescent pigments constituting its core segment. As a result, a broad base of Kuncai investors and users worldwide…

Regarding Global New Materials International’s acquisition of Merck’s surface treatment business

Responses that matter to investors and users

In recent years, the pearlescent pigment industry has undergone significant changes: first, Taiyang Chemical acquired BASF; subsequently, Global New Materials acquired a stake in CQV; and most recently, Global New Materials has also acquired Merck’s surface‑treatment business—whose core segment is pearlescent pigments. As a result, both Kuncai investors and global customers have been closely following these developments. In line with our commitment to the industry’s healthy and sustainable growth and taking into account our company’s specific circumstances, we hereby provide the following clarification:

I. Throughout the history of pearlescent pigment development, Merck, BASF, and CQV have all delivered outstanding performance, making remarkable contributions to the industry’s progress and the expansion of its application fields. In the world of color, they hold a pivotal position and are partners of Kuncai. It is precisely their presence that has shaped Kuncai as it stands today. Regardless of any changes in their shareholders or ultimate controlling interests, we remain committed to continuing our journey together in the market, co‑creating richer hues, fulfilling people’s aspirations for a better life, and working in concert toward the industry’s high‑quality, sustainable development.

II. Kuncai is one of the leading companies in the pearlescent pigment industry, boasting the highest market share and the broadest range of colors and product categories. It takes a pioneering stance in sustainable development and low‑carbon production, with core competitiveness in end‑to‑end, industry‑wide sustainable innovation. Kuncai was the world’s first to independently produce synthetic mica, titanium oxychloride, and ferric chloride, and also the first in the entire sector to develop proprietary equipment for mica processing, automated hydrolysis, pearlescent calcination, fully automated dust‑free packaging, as well as an AI‑driven color‑development system. Today, Kuncai has become a major global supplier of high‑end pearlescent pigments and a strategic partner to industry leaders across multiple sectors.

III. Kuncai’s wholly owned subsidiary currently boasts an annual production capacity of 200,000 tons for titanium dioxide chloride and iron oxide product lines. It can leverage intermediate products to supply the key raw materials—titanium oxychloride and ferric chloride—required for manufacturing Kuncai’s pearlescent pigments, thereby ensuring product quality, reducing carbon emissions, and creating additional conditions and opportunities for developing new products. In the face of intense market competition, Kuncai consistently places the market at the forefront, puts customers first, values innovation, and regards sustainable development as its lifeblood. Upholding a spirit of starting from scratch and making bold leaps, the company champions learning from losses, rejects mediocre success, eschews hollow victories, and persistently pursues the values of industrial civilization. A truly great enterprise offers not only high‑quality products and services but also a strong sense of responsibility and commitment. As the world’s largest producer of pearlescent pigments, we share deep concern over the significant changes reshaping the industry, which align with prevailing trends and market dynamics. We refrain from commenting on this acquisition; however, we sincerely wish it every success and remain committed to safeguarding the core interests of the industry and its broad user base.

4. Kuncai’s titanium dioxide and iron oxide businesses share significant overlap with the broad user base of pearlescent pigments, with extensive application penetration. We are committed to providing both new and existing customers with higher‑quality products, expanding the scope and value of our collaborations, strengthening technical support, and offering cost‑effective, highly customizable solutions. We continuously innovate and extend our upstream resource base, building a more robust, sustainable end‑to‑end industrial chain to deliver a reliable, secure supply‑chain foundation, while steadily deepening and refining our titanium dioxide and iron‑based product lines. Leveraging decades of expertise in pearlescent pigments, Kuncai persistently develops functional products that meet diverse application needs, optimizes its intelligent systems, accelerates digital transformation, and enhances corporate performance and growth. From improving operational efficiency and transitioning to higher‑dimensional structural benefits, to upgrading product portfolios and optimizing the entire industrial chain while mitigating risks, Kuncai remains the only company in the industry that has undertaken such a comprehensive, high‑level transformation across the entire value chain—earning widespread respect from the sector and strong recognition from our customers.

5. As uncertainty in the international community and global markets continues to rise, trade tariffs and exchange-rate risks are escalating, and ocean freight rates are climbing, export costs and risks are mounting. Kuncai, with its extensive network of international customers and partners, is actively exploring the establishment of production bases and technology centers overseas, accelerating its global footprint and deepening its integration into the international market to address these challenges and risks. By leveraging mature technologies and proven process equipment, we are localizing production, enabling more convenient service to customers worldwide, while effectively enhancing operational efficiency, reducing costs, creating additional local employment, sharing business gains, and fully capitalizing on our research and technological advantages, thereby maximizing the value of Kuncai’s end-to‑end industrial chain.

We sincerely hope that our investors and customers will continue to wholeheartedly support Kuncai’s strategic development. We will, as always, remain committed to the company’s growth strategy and work hand in hand with you to build an even brighter future.

Fujian Kuncai Material Technology Co., Ltd.

Xie Bingkun

July 27, 2024

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