Sherwin-Williams to Make Divestiture to Complete Valspar Acquisition

By Ezequiel Minaya 

Sherwin-Williams Co. on Thursday said it now expects to sell part of its business to complete its acquisition of rival Valspar Corp., a consumer-focused paint maker found in home-improvement chain stores.

"We now expect a divestiture will be required to gain approval from the [Federal Trade Commission] to complete the acquisition of Valspar," Chief Executive John G. Morikis said in a prepared statement.

In December, the companies said they had expected "no or minimal divestitures should be required" to make the deal pass muster.

Shares of the company jumped 8.4% in midday trading as the company also posted strong financial results.

He added that the expected divestiture has revenues below the $650 million threshold, and that the company expects to negotiate the divestiture and complete the Valspar deal within 90 days. The acquisition of Valspar is set to be one of Sherwin's biggest acquisitions ever.

Sherwin-Williams added on Thursday that its profit rose in its latest quarter, spurred by an increase in sales volumes in its paint stores group and strong same-store revenue growth.

For the three-month period ended Dec. 31, 2016, the paint stores group saw sales increase 9.8% to $1.84 billion. In the latest quarter, sales for stores open for more than 12 months increased 5.3% from a year ago, well above the 1.5% expected by analysts on FactSet. The segment's profit rose 8.2%.

In all for the quarter, Sherwin posted a profit of $203 million, or $2.15 a share, up from a profit of $198 million, or $2.11 a share, a year prior. The quarter's results included a 22-cent-per-share charge for acquisition costs partially offset by a three-cent tax benefit. Excluding certain items, adjusted earnings were $2.34.

Revenue rose 6.8% to $2.78 billion.

The company had projected earnings of $2.13 to $2.23 a share in the current quarter, while analysts surveyed by Thomson Reuters were expecting $2.21 a share on $2.69 billion in revenue.

Shares in the company were inactive premarket.

For the current quarter, the company expects earnings on a per-share basis between $1.45 and $1.55 compared with $1.75 in the first quarter of 2016, though Sherwin-Williams expects revenue to climb as much as a high single-digit percentage. The company expects adjusted earnings to be between $2.03 and $2.13, above the $1.95 expected by analysts.

The projection for the current quarter includes costs of 69 cents linked to the Valspar acquisition and an 11-cent tax benefit.

For the full year, the company expects earnings between $13.00 and $13.20 a share compared with $11.99 in 2016. Full-year results will be pressured by an estimated 80-cent cost linked to Valspar and a 20-cent tax benefit. The company expects full-year adjusted earnings between $13.60 and $13.80, compared with $13.63 expected by analysts.

(END) Dow Jones Newswires

January 26, 2017 12:42 ET (17:42 GMT)

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