The Sherwin-Williams Co. has decided to acquire rival U.S. paint company Valspar Corp., the firms said on Sunday, within an all-cash deal valued at about $9.3 billion.
Sherwin-Williams can pay $113 a share, or reduced around 41 percent to Valspar’s volume weighted average price for the thirty days through March 18, they said in a statement.
Valspar shares closed at $83.83 on Friday on the brand new York STOCK MARKET, and Sherwin-Williams ended at $288.69.
Sherwin-Williams said the offer had "an enterprise value around $11.3 billion." The worthiness includes debt and equity.
"The combination expands our brand portfolio and customer relationships in THE UNITED STATES, 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 center East and Africa)," Sherwin-Williams LEADER John Morikis said in the release.
The combined company could have pro forma 2015 revenues of $15.6 billion, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $2.8 billion, and about 58,000 employees, they said.
The transaction will probably be worth about $8.9 billion, predicated on the 79.09 million Valspar shares outstanding according to Reuters data.
Sherwin-Williams will stay headquartered in Cleveland. Valspar is situated in Minneapolis.
Sherwin-Williams manufactures products beneath the Sherwin-Williams, Dutch Boy, Krylon, Minwax, Thompson’s Water Seal and other brands. Furthermore, to making coatings for the construction, industrial and transportation markets, Valspar sells consumer paints beneath the Valspar, Cabot Stain, Devine Color and other brands.
The firms estimated annual savings of $280 million of within 2 yrs.
Sherwin-Williams and Valspar said they expect the offer to immediately increase earnings, excluding onetime costs.
The transaction is likely to close by the finish of the first quarter of 2017, at the mercy of approval by Valspar shareholders, they added. The boards of directors of both companies have unanimously approved the offer.
Sherwin-Williams and Valspar said they expect antitrust regulators to approve the merger without requiring the sale of any businesses, or require "minimal divestitures" for the most part.)
In the unlikely event that the firms must sell businesses with total revenues greater than $650 million, the transaction price will be adjusted to $105 in cash per Valspar share, the firms said.
Sherwin-Williams gets the to call off the offer if required divestitures exceed $1.5 billion in 2015 revenues.
Sherwin-Williams said it intends to finance the transaction with cash readily available, existing credit facilities and new debt.
Sherwin-Williams said it could maintain steadily its current dividend and rapidly reduce debt which consists of free cashflow.
Citibank was the lead financial adviser to Sherwin-Williams, and J.P. Morgan Securities LLC also acted as financial advisor. Citigroup Global Markets Inc provides bridge financing.
Goldman Sachs and Bank of America Merrill Lynch are acting as financial advisers to Valspar.