The 150 year old coatings manufacturer who was once in trouble with the EPA for it Cover the World logo and slogan, has agreed to purchase its rival, the Valspar Corporation for a reported $11.3 billion. The Cleveland, Ohio based Sherwin-Williams, with the iconic logo that displays red paint being poured over the earth surface, was once thought to be one of the most recognized brands, along with the likes of Coca Cola. However with the emergence of environmentalism, the logo was considered a relic, and was abandoned in 1974. The company, however, believed that there far too much value in the recognition, and the logo was restored in 1982.
The Valspar Corporation with headquarters in Minneapolis Minnesota, employees more than 11,000 people in 25 countries around the globe, and is more than two centuries old. It’s latest reports shows sales of $ 4.3 billion, while the Sherwin-Williams Corporation, which has become recognized as the largest manufacturer of paint and coatings in the U.S and is also considered the world’s third largest top producer, employs more than 37,000 people in 120 countries around the world. It sales revenue for 2015 was reported to exceed $11.3 billion, giving the combined entity, revenue from sales that exceed $15 billion.
The deal, if and when it is completed, would see Sherwin -Williams paying $113 per share for the Minnesota based enterprise, at a price which is 35 % higher than it latest closing price, and would also include the assumption of Valspar’s debt. The combination with Valspar is expected to strengthen SW’s presence outside of North America, while new products are introduced.
Sherwin-Williams has always maintained a very strong presence in the consumer market with well known paint brands such as Dutch Boy, Minwax, Thompson’s Water Seal, and the Easy Living and Weather brands that are exclusive to Sears and Kmart. Valspar’s strength on the other hand has been in the industrial sector with coatings for food and metal coils.
Sherwin-Williams CEO, John G. Morikis, explains in recent interview, that the deal was something that both outfits have been anticipating for several years.
The deal is expected to result in more than $320 million in annual savings within fours after consolidation is complete. However, it has been structured to be unusually complex, with a few concessions, although regulatory approval from the FTC is expected. The companies have agreed to divestiture of more than $650 million if required, and Sherwin-Williams has reserved the right to walk away from the deal if divesting more than $1.5 billion is required. Morikis expresses confidence that the deal will be approved, as both operations are seen to be complementary.
There has not yet been any disclosure of consolidation of operations, which can be expected, but because Sherwin-Williams would have to borrow, a downgrade in the company’s credit rating can be expected. It is however, expected that headquarters of the combined operation be transferred to Sherwin-Williams’s headquarters in Cleveland, while some presence is still maintained in Minneapolis.