Sherwin-Williams to Buy Paint Rival Valspar for $9.3B
Sherwin-Williams has agreed to acquire rival U.S. paint company Valspar, the companies said on Sunday, in an all-cash deal valued at about $9.3 billion.
Sherwin-Williams will pay $113 a share, or a premium of about 41 percent to Valspar's volume weighted average price for the 30 days through March 18, they said in a statement.
Valspar shares closed at $83.83 on Friday on the New York Stock Exchange, and Sherwin-Williams ended at $288.69.
Sherwin-Williams said the deal had "an enterprise value of about $11.3 billion." The value includes debt and equity.
"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 the Asia-Pacific and EMEA (Europe, the Middle East and Africa)," Sherwin-Williams Chief Executive John Morikis said in the release.
The combined company would have pro forma 2015 revenues of $15.6 billion, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $2.8 billion, and about 58,000 employees, they said.
The transaction is worth about $8.9 billion, based on the 79.09 million Valspar shares outstanding according to Reuters data.
Sherwin-Williams will remain headquartered in Cleveland. Valspar is based in Minneapolis.
Sherwin-Williams manufactures products under the Sherwin-Williams, Dutch Boy, Krylon, Minwax, Thompson's Water Seal and other brands. In addition, to making coatings for the construction, industrial and transportation markets, Valspar sells consumer paints under the Valspar, Cabot Stain, Devine Color and other brands.
The companies estimated annual savings of $280 million of within two years.
Sherwin-Williams and Valspar said they expect the deal to immediately increase earnings, excluding onetime costs.
The transaction is expected to close by the end of the first quarter of 2017, subject to approval by Valspar shareholders, they added. The boards of directors of both companies have unanimously approved the deal.
Sherwin-Williams and Valspar said they expect antitrust regulators to approve the merger without requiring the sale of any businesses, or require "minimal divestitures" at most.)
In the unlikely event that the companies are required to sell businesses with total revenues of more than $650 million, the transaction price would be adjusted to $105 in cash per Valspar share, the companies said.
Sherwin-Williams has the right to call off the deal if required divestitures exceed $1.5 billion in 2015 revenues.
Sherwin-Williams said it intends to finance the transaction with cash on hand, existing credit facilities and new debt.
Sherwin-Williams said it would maintain its current dividend and rapidly reduce debt using its free cash flow.
Citibank was the lead financial adviser to Sherwin-Williams, and J.P. Morgan Securities LLC also acted as financial advisor. Citigroup Global Markets Inc will provide bridge financing.
Goldman Sachs and Bank of America Merrill Lynch are acting as financial advisers to Valspar.
(Reporting by Scott DiSavino; Editing by Richard Chang and Alan Crosby)