Sherwin-Williams to Buy Valspar for $8.9 Billion -- 5th Update
20 März 2016 - 8:05PM
Dow Jones News
By Dana Mattioli, Dana Cimilluca, Liz Hoffman and James R. Hagerty
Sherwin-Williams Co. has agreed to buy Valspar Corp. for about
$8.9 billion, a deal that would give the company more bulk in its
battle with paint rivals PPG Industries Inc. and Amsterdam-based
AkzoNobel NV.
The deal is worth $113 a share in cash, a 35% premium to
Friday's close. The Wall Street Journal reported earlier Sunday
that the companies were in talks to combine.
The purchase would give Sherwin another strong brand to sell
through big-box retailers like Home Depot Inc., Lowe's Cos. and
Wal-Mart Stores Inc., which have been taking market share away from
independent paint stores.
Sherwin has long relied heavily on its own stores for paint
sales but last year began selling a new HGTV brand of paint at
Lowe's stores, taking some space from rivals like Valspar.
Sherwin's longstanding logo shows a can of red paint being
poured over a globe, bearing the slogan, "Cover the earth."
Mostly, though, the Cleveland-based company has covered the U.S.
and Canada, which account for about 82% of its sales. The Valspar
acquisition would reduce the North American share to about 76% by
adding sales in Asia and Europe.
"It gives us the scale and platform" to expand in Europe and
Asia, Chief Executive John G. Morikis said in an interview Sunday.
He was promoted to CEO effective Jan. 1, succeeding Christopher
Connor.
Valspar sells architectural coatings, or paint for houses and
buildings, in China and Australia, where Sherwin hasn't had any
significant presence in that product line, for instance.
Valspar also has strength in two other areas Sherwin has been
absent: coatings for food and beverage packaging and for steel
coils.
No decision had been made on whether Gary Hendrickson, chairman
and chief executive of Valspar, would stay with the combined
company, Mr. Morikis said.
Sherwin valued the Valspar deal at $11.3 billion, including the
assumption of debt. The companies said they expect minimal pushback
from antitrust authorities, but should regulators require Sherwin
to sell businesses that contributed more than $650 million to
Valspar's 2015 revenue, the deal price would be reduced by $8 a
share. And Sherwin can walk away if regulators require divestitures
of more than $1.5 billion in revenue.
The combined Sherwin and Valspar would have had about $15.6
billion in sales last year, slightly ahead of PPG's $15.3 billion.
AkzoNobel had 2015 sales equivalent to about $16.7 billion.
The global coatings market--including paint and coatings used
for cars, ships and myriad other products--produces about $130
billion of sales a year, according to PPG.
Sherwin said it expects the deal to immediately add to earnings,
excluding one-time costs, and projected $280 million in synergies a
year.
It has been a busy stretch for deals in the chemicals space,
which coatings companies would fall under. Last year, chemicals
giants Dow Chemical Co. and DuPont Co. signed a deal worth a
combined $120 billion.
Write to Dana Mattioli at dana.mattioli@wsj.com, Dana Cimilluca
at dana.cimilluca@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
(END) Dow Jones Newswires
March 20, 2016 14:50 ET (18:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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