Hempel Plots Global Growth Riposte to Sherwin-Valspar Paint Deal

  • New CEO Andersen seeking expansion in U.S., Asia, Middle East
  • Monitoring for any Sherwin-Valspar deal assets put up for sale

As Sherwin-Williams Co.’s $9.3 billion purchase of Valspar Corp. creates a new leader in the paint-making industry, Denmark’s Hempel A/S is on the look out for deals to help take the fight to the U.S. company, new Chief Executive Officer Henrik Andersen said.

Three weeks after Andersen took over as CEO, Sherwin and Valspar announced in March their plan to create the world’s biggest coatings company with more than $15 billion in revenue. Andersen was on a tour of Hempel’s operations in North America, the Middle East and Asia, regions where he’s now seeking to build on the company’s 1.56 billion euros ($1.7 billion) of 2015 sales.

While the main focus is on expanding existing operations, closely held Hempel will look out for any assets put up for sale as part of the Sherwin-Valspar deal, Andersen said in a phone interview on Wednesday. Sherwin would be able to reduce its offer for Valspar if antitrust regulators demand disposals that account for more than $650 million in revenue.

That condition wouldn’t have been written into the deal if there “wasn’t a meaningful chance” it might be triggered, according to John Roberts, an analyst at UBS Securities.

Hempel hopes advisers on the Sherwin-Valspar deal think of the Danish company when pitching any assets that need to be disposed, the CEO said, adding that there are other opportunities in the pipeline. “We’re not sitting around worrying about how there’s going to be a larger competitor,” he said.

European Ambitions

Last year, Hempel bought Dallas-based waterproof-coatings maker Jones Blair to expand in the oil and gas and construction markets. There are always "various discussions” ongoing with potential takeover targets, Andersen said.

Valspar’s European ambitions were made clear when its decorative paint-mixing centers displaced those of Netherlands-based Akzo Nobel NV to supply the U.K.’s home-improvement chain B&Q. PPG Industries Inc. of the U.S. has also acquired businesses to strengthen its position on the continent. Hempel’s European competitors include Akzo and Tikkurila Oyj of Finland.

Hempel is among the 10 biggest suppliers in the coatings markets where it operates. Sherwin-Williams is poised to displace PPG at the top of the rankings, while Akzo is Europe’s largest coatings supplier.

Andersen, the former chief operating officer of Danish cleaning and catering services company ISS A/S, said he’ll stick to Hempel’s existing strategic plan through 2020, though there will be greater emphasis on efficiency and “watching the costs.” The focus will also be on adding new markets and products across the decorative-paint, marine and protective coatings segments, he said.

Stronger Wording

“There’s quite a number of things in the Journey of Excellence plan that I think are absolutely the right thing to do,” the CEO said. Some assumptions made in the plan “will have changed so there might be a need to adjust or use stronger wording,” he said.

Under the ownership of the Hempel Foundation, the 100-year-old company has had the freedom to expand, Andersen said. The company is building three new manufacturing sites and expanding in Russia when most countries wouldn’t be willing to take the risk, he said.

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