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Sherwin-Williams Cancels Bid for Comex Mexico Unit

Sherwin-Williams Co., the largest U.S. paint retailer, terminated its agreement to acquire the Mexican operations of Consorcio Comex SA after antitrust regulators blocked the deal.

Either party may cancel the deal without being in material breach of the agreement since the acquisition wasn’t completed by March 31, Cleveland-based Sherwin said today in a statement. Mexico City-based Comex, the country’s largest paint maker, on April 1 said Sherwin had breached the agreement.

Sherwin-Williams Chairman and Chief Executive Officer Christopher M. Connor was seeking to double sales in Latin America when he agreed in 2012 to buy Comex for $2.34 billion, including the assumption of debt. Mexican regulators repeatedly blocked the sale of the local unit and Sherwin in September acquired the U.S. and Canada operations for $165 million.

“Two formal rejections by the antitrust authorities in Mexico and no apparent line of sight into a successful outcome without massive concessions drove the decision to terminate the agreement,” Ghansham Panjabi, a New York-based analyst at Robert W. Baird & Co., said in a note today.

Sherwin yesterday asked the Supreme Court of New York to declare the company had used commercially reasonable efforts to complete the acquisition and hadn’t breached the agreement.

The acquisition would have boosted Sherwin’s earnings by at least $1.50 a share, Panjabi said. Terminating the deal ends 18 months of uncertainty and allows the company to “aggressively” buy back shares and pursue other deals, he said.

Sherwin fell 3.3 percent to $193.89 at the close in New York. The shares have gained 17 percent in the past year.

PPG Industries Inc. is a “likely” and “logical” bidder for Comex, Panjabi said. Such a deal may boost earnings at the Pittsburgh-based company by 80 cents a share, he said. Panjabi recommends buying shares of Sherwin-Williams and PPG.

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