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Comex Sues over Derailed Sherwin Deal

Tuesday, May 20, 2014

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Shareholders of Mexico’s largest coatings producer are accusing Sherwin-Williams of “dishonor” in failing to complete its $2.34 billion takeover of the Latin American supplier, reports say.

Sherwin demonstrated "serious neglect and constant failures in its conduct," Consorcio Comex, S.A. de C.V. reported in announcing a lawsuit against the Cleveland-based paint maker.

The suit, filed Wednesday (May 14), was reported by Reuters and by The Plain Dealer of Cleveland.

The litigation follows Sherwin-Williams' announcement in April that would terminate its $2.34 billion offer to acquire Comex, the fourth-largest paint and coatings maker in North America.

A spokesman for Sherwin-Williams said Friday (May 16) that the company did not plan to comment on the suit.

$2.34B Offer

Sherwin-Williams announced in November 2012 that it planned to buy Comex, extending the Cleveland-based company's reach throughout Latin America, where PPG Industries has been aggressively expanding.

The  acquisition would have been the biggest in Sherwin-Willliams' history.

Comex
Sherwin-Williams

Comex is reportedly suing Sherwin-Williams over its failed plan to acquire the Mexican paint company. Sherwin-Williams previously stated that Comex notified them of an "incorrect belief" that it had breached its contract.

Consorcio Comex, S.A. de C.V. (Comex Group), headquartered in Mexico City, manufactures and sells industrial, protective, specialty and architectural coatings throughout Latin America, the U.S., and Canada.  Founded in 1952, the privately held business operates eight manufacturing sites in Mexico, five in the U.S., and three in Canada.

Both companies voiced enthusiasm for the acquisition when it was announced. Sherwin-Williams called the companies "an ideal fit in every respect."

Mexican regulators approved the $90 million acquisition of Comex's North American business, and that deal concluded in 2013.

However, Mexico twice rejected Sherwin-Williams' bid for Comex's much larger Latin America portfolio, finally prompting the U.S. company to end its pursuit.

'Well Below' Standards

Now, according to Reuters, Comex says Sherwin-Williams' efforts to get approval after the second rejection were "well below" the standards set in the purchase agreement.

Mexico's Federal Economic Competition Commission (COFECE) initially rejected the deal in July 2013, stating the acquisition would give the combined company 48 percent to 58 percent of the regional market share—10 times that of its closest competitor.

paint company acquisition
Comex Group

Sherwin-Williams' plans to acquire Comex for $2.34 billion were twice rejected by Mexican regulators, who said the combined company would have 48 to 58 percent of the regional market share.

While working to appeal that decision, Sherwin-Williams completed the deal for  Comex's 314 stores and eight manufacturing sites in the U.S. and Canada.

But Mexican regulators again rejected the $2.34 billion Latin American deal in October 2013. Sherwin-Williams said that it would review the decision and was "considering all options, including whether to refile."

Seeking Court Declaration

In April, Sherwin-Williams terminated its offer to acquire Comex and filed a complaint with the Supreme Court of New York, requesting a decaration that the U.S. company had used "commercially reasonable efforts as required under the stock purchase agreement and has not breached the agreement."

The court request came just days after Comex notified Sherwin-Williams that it had breached its obligations, according to Sherwin-Williams, which termed the accusation "incorrect."

Because the deal hadn’t closed by March 31, 2014, Sherwin-Williams said that under the terms of the agreement, either party could cancel without being in material breach.

Comex is seeking unspecified damages and reportedly has requested that the International Chamber of Commerce arbitrate the conflict, according to reports.

   

Tagged categories: Acquisitions; Business matters; Business operations; Coatings manufacturers; Comex; Finance; Lawsuits; Market share; Sherwin-Williams

Comment from john lienert, (5/20/2014, 5:02 AM)

Uh-Oh......not enough “mordida” for the mexican govt.


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