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Sherwin-Williams to Buy Paint Maker Comex for $2.34 Billion

Paint color swatches sit on display at a Sherwin-Williams Co. store in Princeton, Illinois. Photographer: Daniel Acker/Bloomberg
Paint color swatches sit on display at a Sherwin-Williams Co. store in Princeton, Illinois. Photographer: Daniel Acker/Bloomberg

Nov. 12 (Bloomberg) -- Sherwin-Williams Co., the largest U.S. paint retailer, agreed to acquire closely held Consorcio Comex SA de CV for about $2.34 billion including debt to gain Mexico’s largest paint maker as housing demand improves. The shares rose the most in more than a year.

Sherwin-Williams will fund the all-cash deal by selling $2 billion in 5-, 10- and 30-year bonds, the Cleveland-based company said in a presentation today on its website. It didn’t specify how much debt it’s assuming. The acquisition would be the biggest takeover in Mexico by a U.S. company since 2004, according to data compiled by Bloomberg.

Sherwin-Williams Chairman and Chief Executive Officer Christopher M. Connor is adding to the company’s 3,500 North American stores after an improving North American housing market led to record earnings in the third quarter. Comex, which has exclusive sales to 3,300 paint stores in Mexico, generated two-thirds of its $1.4 billion of revenue last year in Latin America, Sherwin-Williams said in the presentation.

“While the financial details remain unclear, we view the deal as strategically accretive to the Sherwin-Williams franchise as it extends the company’s already impressive distribution network to Mexico and Latin America,” Ghansham Panjabi, a New York-based analyst at Robert W. Baird & Co. who rates the shares neutral, or the equivalent of hold, said in a report today.

Sherwin-Williams rose 5.8 percent to $149.06 at the close in New York, the most since Sept. 26, 2011.

Americas Paint

The deal may close in the first quarter, pending regulatory approvals, Chief Financial Officer Sean P. Hennessy said on a conference call today. Financial details on family-owned Comex won’t be disclosed until 75 days after the closing, he said.

Comex also sells to almost 1,600 stores in Canada and it operates 240 stores in the U.S. It has more than 7,200 employees and it operates eight factories in Mexico, five in the U.S. and three in Canada, according to a statement today.

It’s the largest paint maker in Mexico, said Jorge Quintana, an outside Comex spokesman with Fleishman-Hillard. The acquisition of the Mexico City-based company will double Sherwin-Williams sales in Latin America, the company said.

“This transaction will significantly increase our presence in markets where our store count is low,” Connor said in the statement. “It builds upon our strategy to grow our architectural paint business in the Americas.”

International Brands

Comex is the leading paint brand in Mexico, selling through 750 concessionaires who carry no other brand in the 1 to 100 stores operated by each, Sherwin-Williams said. Comex’s Canadian brand is General Paint and its U.S. brands are Color Wheel, Kwal, Frazee and Parker.

Pretax profit in the Latin America segment rose 4 percent to $51.1 million in the first nine months of the year even as sales fell 0.6 percent to $604.6 million, Sherwin-Williams said Oct. 25. Total company net income has increased 32 percent this year to a record $563 million, or $5.37 a share, as sales from U.S. paint stores climbed.

Sales of existing homes in Mexico are improving faster than new homes, Carlos Hermosillo, an analyst covering builders for Grupo Financiero Banorte SAB, said in a telephone interview from Mexico City. The outlook for paint sales is positive because of increased remodeling of existing homes, he said.

“People are investing in rehabilitating used homes and there’s a generalized increase in purchasing power,” Hermosillo said. “That makes an investment in this sector very interesting.”

Sales Volumes

Latin American sales volumes will continue to improve in the fourth quarter, widening profit margins, CFO Hennessy said on an Oct. 25 conference call.

Debt will triple to three times earnings before interest, taxes, depreciation and amortization, Hennessy said on the call. Debt should drop to 1.25 times Ebitda by 2018, he said.

Sherwin-Williams said it plans to reduce stock buybacks for the next two years while maintaining its dividend payout.

U.S. sales of new homes rose to an annual pace of 389,000 in September, the highest since April 2010, the Commerce Department reported on Oct. 24. Housing starts surged 15 percent in September to an annual pace of 872,000, the fastest pace since July 2008.

Jones Day was Sherwin-Williams legal adviser on the transaction. HSBC Holdings Plc advised Comex.

To contact the reporters on this story: Jack Kaskey in Houston at; Brendan Case in Mexico City at

To contact the editor responsible for this story: Simon Casey at

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