Paint company Sherwin-Williams is buying rival Valspar for $11.3 billion in a move that it says will expand its reach in Asia and Europe.Pat Wellenbach/The Associated Press
Sherwin-Williams Co., the largest U.S. paint retailer, said it agreed to buy rival Valspar Corp. for about $9.3-billion (U.S.) in cash to become the world's biggest coatings maker.
Sherwin-Williams will pay $113 a share, the companies said Sunday in a statement. The price is about 35 per cent higher than Valspar's closing price of $83.83 on Friday, when its market value reached $6.63-billion.
John Morikis, chief executive officer of Sherwin-Williams, is forging the company's biggest deal less than three months after succeeding long-time CEO Christopher Connor. Sherwin-Williams, which makes 84 per cent of its sales in the United States, gains a company that generates almost half of its revenue abroad while also adding coatings for coils and packaging. Valspar will help Sherwin-Williams expand in the Asia Pacific region and Europe, Mr. Morikis said in an interview.
"This accelerates the strategy we have long had in place," Mr. Morikis said by telephone Sunday. "Valspar is a company we have long admired."
Mr. Morikis said the talks started after his Jan. 1 start as CEO, when "the stars aligned."
Sherwin-Williams paint stores and brands such as Dutch Boy, Easy Living and MAB helped generate sales of $11.3-billion last year. The company will add $4.39-billion of Valspar revenue from brands such as Valspar Ultra and Duramax, 12 per cent of which comes from China and 7 per cent from Australia, according to data compiled by Bloomberg.
The deal "makes a ton of strategic sense," said Dmitry Silversteyn, a Cleveland-based analyst at Longbow Research who has buy recommendations on both companies. It boosts Sherwin-Williams's sales to U.S. do-it-yourself paint customers, international markets and industrial coatings markets, three areas in which the company is underexposed, he said in an e-mail Sunday.
The combination also will catapult Cleveland-based Sherwin-Williams from the world's third-largest paint company to first, surpassing industry leader PPG Industries Inc. and Akzo Nobel NV, Mr. Morikis said. Minneapolis-based Valspar is ranked No. 4.
Sherwin-Williams has gained 11 per cent this year, closing at $288.69 on Friday. The shares have more than tripled in the past five years, while Valspar's stock has more than doubled.
If antitrust regulators require divesting assets that generate more than $650-million in revenue, the transaction price would drop to $105 a share, and if more than $1.5-billion of divestitures are necessary for approval Sherwin-Williams has the right to terminate the deal.
Mr. Morikis said the company expects antitrust regulators will require minimal divestitures at most.
Sherwin-Williams abandoned a bid in 2014 to acquire Comex, Mexico's largest paint company, after Mexican regulators blocked the sale.