Marking the design industry's largest grossing acquisition so far this year, The Sherwin-Williams Company revealed yesterday that it will acquire Minneapolis-based paint rival Valspar. The purchase is valued at $113 per share as an all-cash transaction, or $11.3 billion at enterprise value. Combined, the companies estimate that they will have 58,000 employees and approximately $15.6 billion in annual revenue.
"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," said John Morikis, president and CEO of Sherwin-Williams, in a statement released by the company. "Customers of both companies will benefit from our increased product range, enhanced technology and innovation capabilities, and the transaction's clearly defined cost synergies."
Morikis also pointed to his company's proven track record of successfully integrating acquisitions, including Dutch Boy in 1980, Dupli-Color Products Co. in 1984, Western Automotive Finishes in 1988, and Krylon and DeSoto Consumer Paints both in 1990. At one point in its 150-year history, the company had completed 16 acquisitions in just 21 months, crowned by Pratt & Lambert in 1996.
The industrial logic of the purchase, as explained by Morikis, estimates $280 million in annual synergies in the areas of sourcing, SG&A and process and efficiency savings within two years, plus a long-term annual synergy target of $320 million.
"We believe that Sherwin-Williams is the right partner to utilize our array of brands and create a premier global coatings company," said Gary Hendrickson, chairman and CEO of Valspar, in a statement released by the company. "We are confident this transaction will create opportunities to accelerate many of the operating initiatives already underway at Valspar... Together we will continue to build on the solid momentum our team has worked so hard to create."
Sherwin-Williams will continue to be headquartered in Cleveland and to maintain a significant presence in Minneapolis. The transaction is expected to close by the end of the Q1 calendar year in 2017.