Newspaper article International New York Times

Paint Makers Add Unusual Twists to Deal of $9 Billion ; Sherwin-Williams's Bid for Valspar Guards against Regulator Hurdles

Newspaper article International New York Times

Paint Makers Add Unusual Twists to Deal of $9 Billion ; Sherwin-Williams's Bid for Valspar Guards against Regulator Hurdles

Article excerpt

Sherwin-Williams's nearly $9 billion bid for Valspar guards against regulatory hurdles.

CORRECTION APPENDED

The famous logo of Sherwin-Williams shows a can of red paint pouring over a globe with the slogan "Cover the Earth."

On Sunday, the paint maker took a step toward that goal by buying a big rival, Valspar, for nearly $9 billion.

If completed, the deal would create a new giant whose lines of paints are sold in North America, Europe and Asia. But the structure of the transaction also showed some unusual concessions that the companies would make if their proposed union ran into regulatory hurdles.

Under the terms of the deal, Sherwin-Williams would pay $113 a share in cash, nearly 35 percent higher than Valspar's closing price on Friday.

Including the assumption of Valspar's debt, the enterprise value of the transaction would be about $11.3 billion.

Combining with Valspar would bolster the presence of Sherwin- Williams outside the United States and Canada. And it would add new product lines for Sherwin-Williams, such as coatings for food and industrial coils.

Together, the two companies reported $15.6 billion in sales last year, ahead of PPG Industries' $15.3 billion and just behind Akzo Nobel's $16.5 billion.

"We believe it expands and extends our capabilities into new geographies," John G. Morikis, Sherwin-Williams's chief executive, said of the deal in an interview on Sunday.

"This is something we've looked for and believed would make a good fit for many years," he added.

Sherwin-Williams said it also expected the deal to yield as much as $320 million in annual cost savings within about four years.

The two companies said they did not expect problems with antitrust regulators, arguing that they have complementary operations. But they have agreed that if the government required divestitures of businesses totaling more than $650 million in Valspar's 2015 revenues, the price of the deal would fall to $105 a share in cash, for a total of $8. …

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