Sherwin-Williams' acquisition of Valspar Corp., the biggest acquisition in Sherwin-Williams' 150-year-history, would create a global paint company with combined revenues of about $15.6 billion, adjusted earnings of $2.8 billion, and about 58,000 employees.
CLEVELAND, Ohio -- Cleveland-based Sherwin-Williams Co. has announced it is acquiring the Valspar Corp., a Minneapolis-based global paints and coatings company, in an all-cash deal for $113 per share, or about $11.3 billion.
The transaction, the biggest acquisition in Sherwin-Williams' 150-year-history, would create a global paint company with combined revenues of about $15.6 billion, adjusted earnings of $2.8 billion, and about 58,000 employees.
Those figures include estimated annual synergies of $280 million in sourcing, selling, general and administrative expenses, and process and efficiency savings within two years, after the deal closes.
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Sherwin-Williams is acquiring Valspar Corp. paints and coatings. The $113-per-share price is about a 41-percent premium over Valspar's average volume-weighted share price for the 30 days including and leading up to Friday, March 18. It would immediately contribute to Sherwin-Williams' earnings, excluding one-time costs for the transaction.
The transaction, which has been unanimously approved by the boards of directors of both companies, is still subject to approval by Valspar shareholders and other closing conditions. It is expected to close by the end of the first quarter of 2017.
Valspar, founded in 1806, reported net sales of $4.4 billion in fiscal 2015. It trades on the New York Stock Exchange under the ticker symbol VAL.
Sherwin-Williams, founded in Cleveland in 1866, posted record sales of $11.3 billion in 2015, and profits-per-share up 27 percent to $11.16. Its ticker symbol is SHW.
Sherwin-Williams said the two companies have "highly complementary paints and coatings offerings," and that the transaction creates "exceptional, diversified array of strong brands and technologies, accelerates Sherwin-Williams growth strategy by expanding its global platform in Asia-Pacific and EMEA [Europe, Middle East, and Asia], and also adds new capabilities in the packaging and coil segments."
"Valspar is an excellent strategic fit with Sherwin-Williams," said Sherwin-Williams' President and Chief Executive John G. Morikis, in a written statement. "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," he said.
"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.
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Sherwin-Williams President and CEO John G. Morikis "Sherwin-Williams has a long track record of successfully integrating acquisitions," Morikis said. "We are highly confident in the industrial logic of the transaction and, once closed, our ability to achieve $280 million of estimated annual synergies in the areas of sourcing, SG&A and process and efficiency savings within two years and our long-term annual synergy target of $320 million."
Gary E. Hendrickson, chairman and CEO of Valspar, said in the same statement that "this compelling transaction... 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," he said.
"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 under way at Valspar," Hendrickson said.
"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."
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Sherwin-Williams' germ-killing Paint Shield Paint was launched in October 2016. Neither Sherwin-Williams nor Valspar believe that divestitures should be required to complete the transaction, but if Valspar is required to divest businesses totaling more than $650 million of its 2015 revenues, the transaction price would drop to $105 per share, per the terms of the merger agreement.
If divestitures are required beyond $1.5 billion in 2015 revenues, "Sherwin-Williams would have the right to terminate the transaction."
Sherwin-Williams said it will finance the transaction using cash on hand, liquidity available under existing facilities, and new debt. Citigroup Global Markets Inc. was the lead financial advisor to Sherwin-Williams, and J.P. Morgan Securities LLC also acted as financial advisor.
Jones Day and Weil, Gotshal & Manges LLP are Sherwin-Williams' legal advisors. Valspar's financial advisors are Goldman Sachs and BofA Merrill Lynch, and Wachtell, Lipton, Rosen & Katz is its legal advisor.
Sherwin-Williams and Valspar will discuss the transaction at an 8 a.m. EST conference call Monday. The public can access the conference call through a live audio webcast on Sherwin-Williams' Investor Relations link at http://investors.Sherwin-Williams.com/index.jsp and on Valspar's Investor Relations link at http://valspar.com.