The combined company would have pro forma 2015 revenues and adjusted EBITDA (including estimated annual synergies) of approximately $15.6 billion and $2.8 billion, respectively, with approximately 58,000 employees, the companies said. It operates more than 4,100 of its own stores and sells in big home-improvement chains like Lowe’s and Home Depot.
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While Sherwin-William’s (NYSE:SHW) logo shows a can of red paint being poured over a globe, bearing the slogan, “Cover the earth”, the US and Canada account for about 82% of its sales. 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. Citigroup Global Markets Inc will provide bridge financing.
Sherwin-Williams said it would finance the deal through a combination of cash on hand, liquidity available under its existing borrowing facilities, and new debt.
“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 CEO John Morikis said in the release. In 2015, the company had $11.3 billion in sales and a $1.1 billion profit.
The potential price cut is a nuanced way to handle antitrust risk, which is usually dealt with more bluntly with all- or-nothing walkaway rights and termination fees.
Sherwin said it expects the deal to immediately add to earnings, excluding one-time costs, and projected $280 million in annual synergies, which normally come from cutting overlapping expenses. “Sherwin-Williams will continue to be headquartered in Cleveland, and we intend to maintain a significant presence in Minneapolis”.
It has been a busy stretch for chemical-company mergers, a category that coatings sellers would fall under.
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Gary E. Hendrickson, chairman and CEO of Valspar, said in the same statement that “We are pleased to announce this compelling transaction, which delivers immediate and certain cash value to our stockholders”. Last year, chemicals giants Dow Chemical Co. and DuPont Co. signed a deal worth a combined $120 billion.
