The purchase of Latexx Partners shows the big boys are winning

Glove makers are consolidating, that's for sure. This is especially so when the sector is decently large and when the existing winners are doing well. While the article on TheEdge says that it will cause a rerating on the sector, I do not think it will affect the prices of the smaller players much. This is because with the industry consolidating, price and size pressure will cause the smaller players to sell. Latexx is not that small, but it is considerably smaller than both Top Glove and Hartalega or even Kossan and Supermax.

Latexx Partner's owner selling at 29% premium from the current traded price shows that there may not be much more from the value it is trading at now. The price offered by Semperit is slightly more than RM500 million for a company which made RM40 million last year.

According to the Malaysian Rubber Export Promotion Council, a total 40 gloves maker are controlling 63% of the global gloves market in 2012 - up from 65 players with 40% market share in 2000. This consolidation is definitely going to be increased further.

The Balance Sheet of a company which Semperit is acquiring

From there, I like the larger players better - Top Glove, Hartalega. If the strategy is to buy candidates which are to be acquired, make sure these are candidates suitable enough to be taken over - not too strong and not too weak. I however do not think Supermax or Kossan will be candidates for takeover unless the offers that are provided are very attractive.