Valspar to Sell Industrial Wood Coatings Business for $420M
Facing anti-trust concerns over its proposed merger with Sherwin-Williams Company, Minneapolis-based paint manufacturer Valspar said Wednesday that it would sell the assets of its North American Industrial Wood Coatings business to Axalta Coating Systems for $420 million.
The all-cash deal is subject to regulatory approval by the U.S. Federal Trade Commission and Canadian Competition Bureau, both of which pushed for the divestiture following Sherwin-William’s $11.3 billion bid for Valspar in March 2016.
In mid-March, John Morikis, the CEO of Cleveland-based Sherwin-Williams, said the two companies would “continue to move forward on the divestiture of a single business that [would] allow us to gain approval from the FTC.” Neither company had specified which business unit was being shopped until now.
With the sale of Valspar’s industrial wood coatings unit, Morikis believes Sherwin-Williams and Valspar should be on the homestretch to regulatory approval. “We believe that we have addressed regulatory concerns appropriately and we are moving forward to obtain approval for our acquisition of Valspar,” he said in a statement on Wednesday.
The Zenith, Lustre Lac and Graintone brand paints made by Valspar’s North American Industrial Wood Coatings business are popular among original equipment manufacturers and for aftermarket use on building products, cabinets, flooring and furniture. In 2016, the unit had $225 million in sales, or just over 5 percent of Valspar’s overall revenue.
“We believe that Axalta is an excellent buyer for our … business and will provide great opportunities for our talented employees,” Gary Hendrickson, chief executive of Valspar, said in a statement.
In a separate release, Philadelphia-based Axalta said Valspar’s business would operate as “a pure bolt-on,” meaning the new portfolio of products would push Axalta into a market it otherwise had no presence in.
“This is an outstanding opportunity for Axalta to enter the large Industrial Wood Coatings market with an industry-leading portfolio of products and customers,” Axalta CEO Charlie Shaver said in a statement.
If the transaction is approved, Axalta will assume control of all personnel, two manufacturing sites, research and development assets and the intellectual property relating to Valspar’s industrial wood coatings business.
Valspar shares were up $1.10, or about 1 percent, on Wednesday to $112.44.