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Paint Company Sherwin-Williams to Acquire Valspar for $9.3 Billion

March 21
5:32 AM 2016

Sherwin-Williams, a paint company, announced on Sunday the acquisition of another paint company Valspar amounting to $9.3 billion.  Once the deal completed, a new paint giant will be created that will sell lines of paints to Asia, Europe and North America. However, the arrangement of the transaction showed some unusual negotiation the companies would make if their suggested union ran into regulatory impediment.

Under the terms of agreement, Sherwin-Williams will pay Valspar's closing price on Friday of $113 a share in cash which is almost 35%.  Enclosing Valspar's given debt, the transaction's enterprise value would come to $11.3 billion.  Merging with Valspar, Sherwin-Williams presence outside of U.S. and Canada would be reinforced adding new product lines including coatings for food and industrial coils, as reported by The New York Times.

"We believe it expands and extends our capabilities into new geographies," John G. Morikis, Sherwin-Williams's chief executive, said of the deal in an interview on Sunday. "This is something we've looked for and believed would make a good fit for many years."

The Sherwin-Williams CEO is shaping the company's largest deal less than three months after replacing long-time CEO Christopher Connor.  Valspar will be helping Sherwin-Williams expansion in the Asia Pacific region and Europe, said Mr. Morikis.

The combination of the two paint companies will leap Sherwin-Williams from being the third biggest paint in the world to become the first, going beyond PPG Industries Inc. and Akzo Nobel NV.  Valspar is at fourth place, The Globe and Mail reported.

Both companies said that they have divest 2015 revenues of $15.6 billion, adjusted earnings before interest, tax, depreciation and amortization of $2.8 billion with almost 58,000 employees. Sherwin-Williams will stay in its Cleveland headquarters and Valspar in Minneapolis.

According to Reuters, Sherwin-Williams products include Sherwin-Williams itself, Krylon, Dutch Boy and Thompson's Water Seal to name a few.  Valspar on the other hand, markets consumer paints under the name Valspar, Devine Color, Cabot Stain and other brands. The paint companies anticipate the deal to boost earnings right away, excluding onetime costs.

The expected closing of the transaction is by the end of the first quarter of 2017 which is subject to Valspar shareholders.  Both companies expect antitrust regulators' approval on the merger without the need to sell any business or necessitate "minimal divestitures".

Citibank and J.P. Morgan Securities LLC will be Sherwin-Williams financial advisers and bridge financing will be provided by Citigroup Global Markets Inc.  Valspar financial advisers will be Goldman Sachs and Bank of America Merrill Lynch.

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