Coating producer The Sherwin-Williams Company will acquire The Valspar Corporation for $113 per share in an all-cash transaction, or an enterprise value of approximately $11.3 billion.
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At $113 per share, the transaction, which has been unanimously approved by the Boards of Directors of both companies, represents a premium of approximately 41% to Valspar's volume weighted average price for the 30 days up to and including March 18, 2016.
Sherwin-Williams and Valspar have highly complementary paints and coatings offerings and this combination enhances Sherwin-Williams position as a premier global paints and coatings provider.
The transaction results in an exceptional, diversified array of strong brands and technologies, accelerates Sherwin-Williams growth strategy by expanding its global platform in Asia-Pacific and EMEA, and also adds new capabilities in the packaging and coil segments.
The combined company would have pro forma 2015 Revenues and Adjusted EBITDA (including estimated annual synergies) of approximately $15.6 billion and $2.8 billion, respectively, with approximately 58,000 employees.
The transaction is expected to close by the end of Q1 calendar year 2017, and is subject to the approval of Valspar shareholders and customary closing conditions.
Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar believe that no or minimal divestitures should be required to complete the transaction.
Under the terms of the merger agreement, in what both companies believe to be the unlikely event that divestitures are required of businesses totaling more than $650 million of Valspar’s 2015 revenues, the transaction price would be adjusted to $105 in cash per Valspar share.
Sherwin-Williams would have the right to terminate the transaction in the event that required divestitures exceed $1.5 billion in 2015 revenues. These provisions provide Sherwin-Williams and Valspar with greater closing certainty.
Sherwin-Williams intends to finance the transaction through a combination of cash on hand, liquidity available under existing facilities and new debt.
Sherwin-Williams has obtained committed bridge financing from Citigroup Global Markets Inc. in support of the transaction and is committed to maintaining its current dividend and rapid deleveraging using significant free cash flow. ■