Sherwin-Williams to Make Divestiture to Complete Valspar Acquisition
January 26 2017 - 8:27AM
Dow Jones News
By Ezequiel Minaya
Sherwin-Williams Co. on Thursday said it now expects to sell
part of its business to complete its acquisition of rival Valspar
Corp., a consumer-focused paint maker found in home-improvement
chain stores.
"We now expect a divestiture will be required to gain approval
from the [Federal Trade Commission] to complete the acquisition of
Valspar," Chief Executive John G. Morikis said in a prepared
statement.
In December, the companies said they had expected "no or minimal
divestitures should be required" to make the deal pass muster.
He added that the expected divestiture has revenues below the
$650 million threshold, and that the company expects to negotiate
the divestiture and complete the Valspar deal within 90 days.
The acquisition of Valspar is set to be one of Sherwin's biggest
acquisitions ever.
Sherwin-Williams added on Thursday that its profit rose in its
latest quarter, spurred by an increase in sales volumes in its
paint stores group and strong same-store revenue growth.
For the three-month period ended Dec. 31, 2016, the paint stores
group saw sales increase 9.8% to $1.84 billion. In the latest
quarter, sales for stores open for more than 12 months increased
5.3% from a year ago, well above the 1.5% expected by analysts on
FactSet. The segment's profit rose 8.2%.
In all for the quarter, Sherwin posted a profit of $203 million,
or $2.15 a share, up from a profit of $198 million, or $2.11 a
share, a year prior. The quarter's results included a
22-cent-per-share charge for acquisition costs partially offset by
a three-cent tax benefit. Excluding certain items, adjusted
earnings were $2.34.
Revenue rose 6.8% to $2.78 billion.
The company had projected earnings of $2.13 to $2.23 a share in
the current quarter, while analysts surveyed by Thomson Reuters
were expecting $2.21 a share on $2.69 billion in revenue.
Shares in the company were inactive premarket.
For the current quarter, the company expects earnings on a
per-share basis between $1.45 and $1.55 compared with $1.75 in the
first quarter of 2016, though Sherwin-Williams expects revenue to
climb as much as a high single-digit percentage. The company
expects adjusted earnings to be between $2.03 and $2.13, above the
$1.95 expected by analysts.
The projection for the current quarter includes costs of 69
cents linked to the Valspar acquisition and an 11-cent tax
benefit.
For the full year, the company expects earnings between $13.00
and $13.20 a share compared with $11.99 in 2016. Full-year results
will be pressured by an estimated 80-cent cost linked to Valspar
and a 20-cent tax benefit. The company expects full-year adjusted
earnings between $13.60 and $13.80, compared with $13.63 expected
by analysts.
Write to Ezequiel Minaya at Ezequiel.Minaya@wsj.com
(END) Dow Jones Newswires
January 26, 2017 08:12 ET (13:12 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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