CLEVELAND, Ohio and MINNEAPOLIS, Minn. – The Sherwin-Williams Co. announced it will purchase paint and coatings rival The Valspar Corp. in a deal worth approximately $11.3 billion. The transaction is expected to close by the end of the first quarter in 2017.
Sherwin-Williams said this was the largest acquisition its 150-year-history and will create a global paint company with combined revenues of about $15.6 billion, adjusted earnings of $2.8 billion, and about 58,000 employees. The acquisition moves the combined company into second place in the global paint and coatings market, behind AKZO Nobel's 2015 revenues of $16.5 billion and ahead of PPG's $15.3 billion.
In a Monday morning conference call, representatives from Sherwin-Williams (NYSE: SHW) and Valspar (NYSE: VAL) said the two firms have highly complementary paint and coatings offerings with minimal overlap. The acquisition was initially announced Sunday, March 20.
John G. Morikis, Sherwin-Williams president and CEO, noted that the acquisition will significantly expand the company's capabilities and international footprint. “Valspar is an excellent strategic fit with Sherwin-Williams. The combination expands our brand portfolio and customer relationships in North America, significantly strengthens our Global Finishes business, and extends our capabilities into new geographies and applications, including a scale platform to grow in Asia-Pacific and EMEA. Customers of both companies will benefit from our increased product range, enhanced technology and innovation capabilities, and the transaction’s clearly defined cost synergies. We have tremendous respect for the expertise and dedication of the Valspar team and we are excited about the opportunities that this combination will provide to both companies’ employees. Sherwin-Williams will continue to be headquartered in Cleveland and we intend to maintain a significant presence in Minneapolis.”
Valspar Chairman and CEO Gary E. Hendrickson added, “We are pleased to announce this compelling transaction, which delivers immediate and certain cash value to our stockholders. We believe that Sherwin-Williams is the right partner to utilize our array of brands and create a premier global coatings company. The combination of Sherwin-Williams and Valspar will benefit our customers, employees and other stakeholders. We are confident this transaction will create opportunities to accelerate many of the operating initiatives already underway at Valspar. We look forward to positioning Valspar to enter its next phase of growth and success and to working closely with Sherwin-Williams to seamlessly close this transaction. Together we will continue to build on the solid momentum our team has worked so hard to create.”
Approximately 17 percent of Valspar's business is in the wood industry. Other markets include: packaging (33 percent), general industrial (30 percent) and coil (20 percent).
According to a statement released March 20, under the terms of the merger agreement, in the event that divestitures are required of businesses totaling more than $650 million of Valspar’s 2015 revenues, the transaction price would be adjusted to $105 in cash per Valspar share instead of $113. Sherwin-Williams would have the right to terminate the transaction in the event that required divestitures exceed $1.5 billion in 2015 revenues.
Morikis said Sherwin-Williams intends to finance the transaction through a combination of cash on hand, liquidity available under existing facilities and new debt. Sherwin-Williams has obtained committed bridge financing from Citigroup Global Markets Inc. in support of the transaction and is committed to maintaining its current dividend and rapid deleveraging using significant free cash flow.
Founded in 1866 and headquartered in Cleveland, Ohio, The Sherwin-Williams Co. manufactures, develops and distributes coatings and related products to professional, industrial, commercial, and retail customers. Brands include Sherwin-Williams®, HGTV HOME® by Sherwin-Williams, Dutch Boy®, Krylon®, Minwax® and Thompson's® Water Seal®. The Sherwin-Williams Global Finishes Group distributes a products in more than 115 countries around the world.
Headquartered in Minneapolis and founded in 1806, Valspar is a global leader in the coatings industry with customers in more than 100 countries. The company had net sales in fiscal 2015 were $4.4 billion.
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