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Sherwin-Williams Seals $11.3B Valspar Deal

Friday, June 2, 2017

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The Sherwin-Williams Company (Cleveland) closed on its acquisition of the Minneapolis-based Valspar Corporation Thursday (June 1), creating the world's largest coatings manufacturer by sales.

The $11.3 billion deal was first announced in March 2016 and was unanimously approved by the boards of directors of both companies. The acquisition met with U.S. and Canadian regulatory approvals last week.

The Sherwin-Williams Company

The long-gestating merger between The Sherwin-Williams Company and The Valspar Corporation was finalized Thursday in a $11.3 billion deal.

The merger creates a global paints and coatings company with a strong financial foothold across the Asia-Pacific and Europe, the Middle East and Africa (EMEA) regions.

"We are pleased to complete this transaction, and I would like to officially welcome our new colleagues from Valspar and the tremendous talent they bring to Sherwin-Williams,” said John G. Morikis, chairman, president and CEO of Sherwin-Williams. “The acquisition of Valspar accelerates Sherwin-Williams' global growth strategy and creates the global leader in paints and coatings.

“The combination of these two companies creates a world-class brand portfolio, expanded product range, premier technology and innovation platforms, and an extensive global footprint. These enhanced capabilities will benefit our customers and create sustainable long-term value for our shareholders."

Terms of the Merger

The companies will complete the deal for $113 per share; the stock was valued at $112.99 a share when the market closed Wednesday. Valspar common stock ceased trading prior to the market opening on Wednesday, and it will be delisted from the New York Stock Exchange.

Sherwin-Williams stock was up $4.58 to $336.35 in mid-afternoon trading Thursday. The company will announce financial results for the second quarter, which ends June 30, on Thursday, July 20.

During the three-month period ending April 28, Valspar reported just under $1.1 billion in net sales, up from just under $1.06 billion during the same period in 2016.

The Valspar quarterly dividend, which was payable on June 8, will not be paid because the deal was completed prior to the close of business on June 1.

Global Power

The combined company reported 2016 revenues of $15.8 billionwith $2.8 billion in adjusted earnings annuallyand has about 60,000 employees worldwide. Its status as the world’s largest paints and coatings company appears to remain secure after PPG Industries on Thursday dropped its pursuit to acquire Dutch paintmaking firm Akzo Nobel.

As part of a regulatory agreement with the Federal Trade Commission in relation to the merger, Sherwin-Williams will divest of Valspar’s North American industrial wood coatings business by selling the unit to Philadelphia-based Axalta Coating Systems for $420 million in cash. That sale, which Sherwin-Williams announced in April, must be completed within 10 days.

Sherwin-Williams and Valspar had announced in a joint press release March 21 that they would extend the termination date of their merger agreement from March 21 to June 21, which would allow Sherwin-Williams to complete the necessary divestitures to clear the regulatory hurdles.

The Valspar Corporation

Sherwin-Williams' acquisition of Valspar will make it the world's largest paints and coatings company.

Sherwin-Williams sells its paints in more than 4,100 company-operated locations, and distributes other brands through mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers and industrial distributors. The firm's Consumer Group, which markets products to do-it-yourselfers, professional paint contractors and industrial maintenance and flooring contractors, accounted for 13.4 percent of total sales in 2016.

Valspar Q2 Sales Up

Valspar offers a broad range of coatings for consumers, along with products for the construction, industrial, packaging and transportation markets. The company released its second-quarter financial earnings Wednesday, on the eve of the acquisition.

During the three-month period ending April 28, Valspar reported just under $1.1 billion in net sales, up from just under $1.06 billion during the same period in 2016. Profits, however, were down year-over-year: $375.9 million in Q2 of 2017, versus $401.4 million in Q2 of 2016.

In the Coatings segment, Valspar reported $616.2 million in sales, up 4.9 percent from 2016 numbers. Valspar’s Coatings business comprises industrial coatings—including decorative and protective coatings for wood, metal and plastic—and product packaging coatings.

In the Paints segment, the company saw $418 million in sales on the quarter, an increase of 2.7 percent over the prior year. Paints include consumer paints, stains, varnishes, floor coatings and the like for the do-it-yourself market, and auto refinish paints.

Valspar’s third business segment, “Other/Administrative,” includes specialty polymers and colorants, furniture care and repair products and other products not included in the other two segments. That segment saw sales of $118.6 million in Q2, a 2.2 percent increase over 2016’s second quarter.

   

Tagged categories: Acquisitions; Coatings manufacturers; Earnings reports; Finance; Mergers; Sherwin-Williams; Valspar

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