Axalta Buys Valspar’s Wood Coatings Business
US coatings specialist Axalta has agreed to buy Valspar’s North American industrial wood coatings business for $420 million in cash, a move that should appease regulators scrutinizing Sherwin-Williams’ acquisition of Valspar.
Both the Federal Trade Commission (FTC) and the Canadian Competition Bureau (CCB) had made it clear that Sherwin-Williams’ $11.3 billion takeover of rival firm Valspar would face antitrust obstacles unless a divestiture was made. The merger was originally expected to close by the end of the first quarter but was delayed to Jun. 21, 2017 to allow time for a divestment to be concluded.
“With this agreement, we believe that we have addressed regulatory concerns appropriately and we are moving forward to obtain approval for our acquisition of Valspar,” said John Morikis, chairman, president and CEO of Sherwin-Williams.
Valspar’s wood coatings business – known as Valspar Wood – had revenues of around $225 million in 2016 and includes well-known brands such as Zenith, Lustre Lac and Graintone. Axalta said it intends to operate the business as a pure bolt-on. The transaction includes personnel, both dedicated manufacturing sites, R&D assets and the underlying intellectual property.
Charlie Shaver, Axalta’s chairman and CEO, described the acquisition as an outstanding opportunity to enter the large industrial wood coatings market with an industry-leading portfolio of products and customers. “The strong reputation enjoyed by these brands among a long-term customer base will provide an excellent platform for future growth in this important market. This acquisition continues to build on our strategy to strengthen and further diversify our performance coatings segment,” he said.
Commenting on the deal, US market research firm Freedonia Group said that while the overall paint and coatings industry edges toward consolidation into a handful of dominant market leaders, the merger will now have less impact on the wood coatings market. Freedonia industry analyst, Matt Breuer, said the original deal would have put Sherwin-Williams’ market share at nearly four times that of the next leading company. “Under the new deal, Axalta, whose existing wood coatings business is small, will largely take the place of Valspar among market leaders,” he said.
Axalta’s purchase is subject to the closing of the Sherwin-Williams and Valspar merger, as well as the usual conditions and regulatory approvals, including clearance by the FTC and CCB.