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Sherwin-Williams, Valspar: Deal Unchanged

Tuesday, November 1, 2016

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The Sherwin-Williams Company and Valspar intend to close their pending merger on schedule in early 2017 and at its planned price, the companies said Friday (Oct. 28), in the face of a report suggesting that the deal was facing regulatory complications.

John G. Morikis, Gary E. Hendrickson
The Sherwin-Williams Company

The Sherwin-Williams Company (under President and CEO John G. Morikis, pictured at left) and Valspar (under Chairman and CEO Gary E. Hendrickson, right) say they expect their $11.3 billion proposed merger to close as expected early next year.

The two companies issued a joint statement indicating that they “continue to cooperate fully with the FTC staff and continue to expect the transaction will close by the end of Q1 calendar year 2017.” The statement continues, “Sherwin-Williams and Valspar continue to believe that no or minimal divestitures should be required to complete the transaction.”

New York Post Report

The New York Post published an article Friday (Oct. 28) citing an unnamed source in saying that a recent round of concessions offered by Sherwin-Williams had been rejected by the Federal Trade Commission. Described as “a well-placed D.C. source closely following the situation,” that person told the Post they felt Sherwin-Williams would need to make significant divestitures in order to gain FTC approval.

The Post noted, though, that “an agreement may still be reached and the deal approved.”

FTC Building, Washington DC
Carol M. Highsmith, public domain, via Wikimedia Commons

In May, the Federal Trade Commission asked for additional information to consider while examining the merger proposal.

As part of the proposed $11.3 billion deal, Sherwin-Williams could divest assets of up to $650 million and keep the sale price at $113 per share. If the company must sell off more than that, the price could drop to $105 per share.

If more than $1.5 billion in divestitures are required, Sherwin-Williams reserves the right to terminate the deal under the terms of the agreement.

The proposed merger was announced in March, and approved by Valspar shareholders in June. In May, the FTC asked for additional information to consider while examining the merger proposal.

If the deal goes forward as planned, it would create a company with $15.6 billion in sales and $2.8 billion in adjusted earnings annually.

Lowe's Speculation

The Post speculated that a regulatory holdup could be linked with concerns about home improvement retailer Lowe’s, which carries both brands, and which, the newspaper says, has not come out in support of the deal. A Lowe's representative told D+D News the company was unable to comment as of Monday (Oct. 31).

Lowe's  store
M.O. Stevens, CC BY-SA 4.0, via Wikimedia Commons

The New York Post speculated that a regulatory holdup could be linked with concerns about home improvement retailer Lowe’s, which carries both brands.

The FTC declined to comment to the New York Post, and did not respond to a request for comment for this story by deadline.

Report Affects Shares

Valspar stock prices dipped after the Post story broke Friday, from about $105.25, where they had held mostly steady for weeks, to a low at closing of $97.73. As of Monday, they had begun to rebound, closing the day at $99.60.

The joint statement from the two companies does not mention the Post article specifically, but refers to “unfounded market rumors concerning regulatory approvals” for the deal. A Sherwin-Williams spokesman confirmed to D+D News that the statement was the full extent of the company’s comment on the matter.

   

Tagged categories: Business matters; Federal Trade Commission; Lowe's; Mergers; Regulations; Sherwin-Williams; Valspar

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