Big deal: Sherwin-Williams to buy Valspar

Pointing to “highly complementary” paints and coatings businesses, Sherwin-Williams will acquire Valspar in deal valued at more than $9 billion.

The move creates a paint-industry giant with about $15.6 billion in 2015 revenues, and $2.8 billion in adjusted EBITDA.

The deal is expected to close by the end of next year’s first quarter. The plan calls for Sherwin-Williams to remain headquartered in Cleveland, with a significant presence in Minneapolis, where Valspar is based.

Sherwin-Williams CEO John Morikis described Valspar as an excellent strategic fit. “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,” he said, in a statement announcing the deal.

Valspar CEO Gray Hendrickson was equally optimistic. “We are confident this transaction will create opportunities to accelerate many of the operating initiatives already underway 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.”

Among Valspar's global brand portfolio are Cabot, Solver, wattyl, Pro-Spray and Valspar Professional. On the other side of the deal are Sherwin-Williams brands including Krylon, Dutch Boy, Thompson's WaterSeal, Pratt & Lambert Paints and Minwax.

During a conference call with Wall Street analysts, the Valspar and Sherwin-Williams executives were asked about the potential for cannibalization amongst the various product lines. Morikis responded that it's too early to address that topic. He did point to "an expanded product portfolio across a wider geography." 

The combined companies generated pro forma 2015 sales of $15.6 billion, leapfrogging industry leading PPG's $14.2 billion in global sales.

According to the SHW-VAL investor presentation, the paint and coatings industry remains fragmented with 12 companies representing nearly 60% of the market, and 7,500 sharing the rest.