Sherwin-Williams to Buy Valspar for $8.9 Billion -- 5th Update

By Dana Mattioli, Dana Cimilluca, Liz Hoffman and James R. Hagerty 

Sherwin-Williams Co. has agreed to buy Valspar Corp. for about $8.9 billion, a deal that would give the company more bulk in its battle with paint rivals PPG Industries Inc. and Amsterdam-based AkzoNobel NV.

The deal is worth $113 a share in cash, a 35% premium to Friday's close. The Wall Street Journal reported earlier Sunday that the companies were in talks to combine.

The purchase would give Sherwin another strong brand to sell through big-box retailers like Home Depot Inc., Lowe's Cos. and Wal-Mart Stores Inc., which have been taking market share away from independent paint stores.

Sherwin has long relied heavily on its own stores for paint sales but last year began selling a new HGTV brand of paint at Lowe's stores, taking some space from rivals like Valspar.

Sherwin's longstanding logo shows a can of red paint being poured over a globe, bearing the slogan, "Cover the earth."

Mostly, though, the Cleveland-based company has covered the U.S. and Canada, which account for about 82% of its sales. The Valspar acquisition would reduce the North American share to about 76% by adding sales in Asia and Europe.

"It gives us the scale and platform" to expand in Europe and Asia, Chief Executive John G. Morikis said in an interview Sunday. He was promoted to CEO effective Jan. 1, succeeding Christopher Connor.

Valspar sells architectural coatings, or paint for houses and buildings, in China and Australia, where Sherwin hasn't had any significant presence in that product line, for instance.

Valspar also has strength in two other areas Sherwin has been absent: coatings for food and beverage packaging and for steel coils.

No decision had been made on whether Gary Hendrickson, chairman and chief executive of Valspar, would stay with the combined company, Mr. Morikis said.

Sherwin valued the Valspar deal at $11.3 billion, including the assumption of debt. The companies said they expect minimal pushback from antitrust authorities, but should regulators require Sherwin to sell businesses that contributed more than $650 million to Valspar's 2015 revenue, the deal price would be reduced by $8 a share. And Sherwin can walk away if regulators require divestitures of more than $1.5 billion in revenue.

The combined Sherwin and Valspar would have had about $15.6 billion in sales last year, slightly ahead of PPG's $15.3 billion. AkzoNobel had 2015 sales equivalent to about $16.7 billion.

The global coatings market--including paint and coatings used for cars, ships and myriad other products--produces about $130 billion of sales a year, according to PPG.

Sherwin said it expects the deal to immediately add to earnings, excluding one-time costs, and projected $280 million in synergies a year.

It has been a busy stretch for deals in the chemicals space, which coatings companies would fall under. Last year, chemicals giants Dow Chemical Co. and DuPont Co. signed a deal worth a combined $120 billion.

Write to Dana Mattioli at [e-mail], Dana Cimilluca at [e-mail] and Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

March 20, 2016 14:50 ET (18:50 GMT)

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