Sherwin-Williams to Acquire Valspar for $11.3B
Paint company Sherwin-Williams will acquire Valspar for approximately $11.3 billion. The Sherwin-Williams Company and The Valspar Corporation have entered into a definitive agreement under which Sherwin-Williams will acquire Valspar for $113 per share in an all-cash transaction, or an enterprise value of approximately $11.3 billion. At $113 per share, the transaction, which has been unanimously approved by the Boards of Directors of both companies, represents a premium of approximately 41 percent to Valspar's volume weighted average price for the 30 days up to and including March 18, 2016.
Founded in 1866, The Sherwin-Williams Company is a global company in the manufacture, development, distribution, and sale of coatings and related products to professional, industrial, commercial, and retail customers. The company manufactures products under brands such as Sherwin-Williams, HGTV HOME by Sherwin-Williams, Dutch Boy, Krylon, Minwax, Thompson's Water Seal, and many more. Sherwin-Williams branded products are sold exclusively through a chain of more than 4,100 company-operated stores and facilities.The Sherwin-Williams Global Finishes Group distributes a wide range of products in more than 115 countries around the world.
Valspar is a global company in the coatings industry providing customers in more than 100 countries. Valspar offers a broad range of coatings products for the consumer market, and highly-engineered solutions for the construction, industrial, packaging and transportation markets.
Sherwin-Williams and Valspar have highly complementary paints and coatings offerings and this combination enhances Sherwin-Williams position as a global paints and coatings provider. The transaction results in an exceptional, diversified array of strong brands and technologies, accelerates Sherwin-Williams growth strategy by expanding its global platform in Asia-Pacific and EMEA, and also adds new capabilities in the packaging and coil segments. 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.
"Valspar is an excellent strategic fit with Sherwin-Williams," said John G. Morikis, President and CEO of The Sherwin-Williams Company. "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. 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."
Morikis added, "Sherwin-Williams has a long track record of successfully integrating acquisitions. 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. We expect this transaction to be immediately accretive excluding one-time costs and meaningfully enhance our cash flow generation profile."
Gary E. Hendrickson, Chairman and Chief Executive Officer of Valspar, said, "We believe that Sherwin-Williams is the right partner to utilize our array of brands and create a premier global coatings company."
The transaction is expected to close by the end of Q1 calendar year 2017, and is subject to the approval of Valspar shareholders and customary closing conditions, including the expiration or termination of the applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act and regulatory approvals in various other jurisdictions. Both companies believe that the combination will benefit customers and that it will receive all necessary regulatory clearances.
Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar believe that no or minimal divestitures should be required to complete the transaction. Under the terms of the merger agreement, in what both companies believe to be the unlikely event that divestitures are required of businesses totaling more than $650 million of Valspar's 2015 revenues, the transaction price would be adjusted to $105 in cash per Valspar share. Sherwin-Williams would have the right to terminate the transaction in the event that required divestitures exceed $1.5 billion in 2015 revenues. These provisions provide Sherwin-Williams and Valspar with greater closing certainty.
Sherwin-Williams intends to finance the transaction through a combination of cash on hand, liquidity available under existing facilities and new debt. Sherwin-Williams has obtained committed bridge financing from Citigroup Global Markets Inc. in support of the transaction and is committed to maintaining its current dividend and rapid deleveraging using significant free cash flow.
Citi acted as 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 acting as legal advisors to Sherwin-Williams. Goldman Sachs and BofA Merrill Lynch are acting as financial advisors to Valspar and Wachtell, Lipton, Rosen & Katz is acting as its legal advisor.
Founded in 1866, The Sherwin-Williams Company is a global company in the manufacture, development, distribution, and sale of coatings and related products to professional, industrial, commercial, and retail customers. The company manufactures products under brands such as Sherwin-Williams, HGTV HOME by Sherwin-Williams, Dutch Boy, Krylon, Minwax, Thompson's Water Seal, and many more. Sherwin-Williams branded products are sold exclusively through a chain of more than 4,100 company-operated stores and facilities.The Sherwin-Williams Global Finishes Group distributes a wide range of products in more than 115 countries around the world.
Valspar is a global company in the coatings industry providing customers in more than 100 countries. Valspar offers a broad range of coatings products for the consumer market, and highly-engineered solutions for the construction, industrial, packaging and transportation markets.
Sherwin-Williams and Valspar have highly complementary paints and coatings offerings and this combination enhances Sherwin-Williams position as a global paints and coatings provider. The transaction results in an exceptional, diversified array of strong brands and technologies, accelerates Sherwin-Williams growth strategy by expanding its global platform in Asia-Pacific and EMEA, and also adds new capabilities in the packaging and coil segments. 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.
"Valspar is an excellent strategic fit with Sherwin-Williams," said John G. Morikis, President and CEO of The Sherwin-Williams Company. "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. 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."
Morikis added, "Sherwin-Williams has a long track record of successfully integrating acquisitions. 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. We expect this transaction to be immediately accretive excluding one-time costs and meaningfully enhance our cash flow generation profile."
Gary E. Hendrickson, Chairman and Chief Executive Officer of Valspar, said, "We believe that Sherwin-Williams is the right partner to utilize our array of brands and create a premier global coatings company."
The transaction is expected to close by the end of Q1 calendar year 2017, and is subject to the approval of Valspar shareholders and customary closing conditions, including the expiration or termination of the applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act and regulatory approvals in various other jurisdictions. Both companies believe that the combination will benefit customers and that it will receive all necessary regulatory clearances.
Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar believe that no or minimal divestitures should be required to complete the transaction. Under the terms of the merger agreement, in what both companies believe to be the unlikely event that divestitures are required of businesses totaling more than $650 million of Valspar's 2015 revenues, the transaction price would be adjusted to $105 in cash per Valspar share. Sherwin-Williams would have the right to terminate the transaction in the event that required divestitures exceed $1.5 billion in 2015 revenues. These provisions provide Sherwin-Williams and Valspar with greater closing certainty.
Sherwin-Williams intends to finance the transaction through a combination of cash on hand, liquidity available under existing facilities and new debt. Sherwin-Williams has obtained committed bridge financing from Citigroup Global Markets Inc. in support of the transaction and is committed to maintaining its current dividend and rapid deleveraging using significant free cash flow.
Citi acted as 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 acting as legal advisors to Sherwin-Williams. Goldman Sachs and BofA Merrill Lynch are acting as financial advisors to Valspar and Wachtell, Lipton, Rosen & Katz is acting as its legal advisor.