AKZOY Akzo Nobel NV (QX)

By Dana Mattioli, Dana Cimilluca, Liz Hoffman and James R. Hagerty 

Sherwin-Williams Co. has agreed to buy Valspar Corp. for about $8.9 billion, a deal that would give the company more bulk in its battle with paint rivals PPG Industries Inc. and Amsterdam-based AkzoNobel NV.

The deal is worth $113 a share in cash, a 35% premium to Friday's close. The Wall Street Journal reported earlier Sunday that the companies were in talks to combine.

Sherwin has long relied heavily on its own stores for paint sales, but last year Sherwin began selling a new HGTV brand of paint at Lowe's stores, taking some space from rivals like Valspar.

The purchase would give Sherwin another strong brand to sell through big-box retailers like Home Depot Inc., Lowe's Cos. and Wal-Mart Stores Inc., which have been taking market share away from independent paint stores.

The global coatings market--including paint and coatings used for cars, ships and myriad other products--produces about $130 billion of sales a year, according to PPG. Sherwin has focused mainly on the U.S. and Latin America, while PPG has pursued more of a global strategy with larger operations in Europe and Asia.

Sherwin-Williams valued the Valspar deal at $11.3 billion, including the assumption of debt. The companies said they expect minimal pushback from antitrust authorities, but should regulators require Sherwin-Williams to sell businesses that contributed more than $650 million to Valspar's 2015 revenue, the deal price would be reduced by $8 a share. And Sherwin-Williams can walk away with regulators require divestitures of more than $1.5 billion in revenue.

Valspar's market value is $6.6 billion. Sherwin-Williams, based in Cleveland, Ohio, has a much larger market value of $26.8 billion. The combined Sherwin and Valspar would have had about $15.6 billion of sales last year, slightly ahead of PPG's $15.3 billion. AkzoNobel had 2015 sales equivalent to about $16.7 billion.

Sherwin-Williams said it expects the deal to immediately add to earnings, excluding one-time costs, and projected $280 million in synergies a year.

It has been a busy stretch for deals in the chemicals space, which coatings companies would fall under. Last year, chemicals giants Dow Chemical Co. and DuPont Co. signed a deal worth a combined $120 billion.

Write to Dana Mattioli at dana.mattioli@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com, Liz Hoffman at liz.hoffman@wsj.com and James R. Hagerty at bob.hagerty@wsj.com

(END) Dow Jones Newswires

March 20, 2016 14:16 ET (18:16 GMT)

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