Shares of PPG Industries shot up as it agreed to buy Mexico s paint company, Consorcio Comex S.A. de C.V., for $2.3 billion to reinforce its architectural coatings business. The acquisition is subject to regulatory clearances and other closing conditions.
Comex has revenues of $1 billion, who makes architectural and industrial coatings and related products in Mexico. The company has 8 manufacturing facilities and 6 distribution centers and markets its products through 3,600 stores in Mexico and Central America.
PPG Industries' shares climbed to 4.4% in the trading session followed by the announcement to strike a new 52-week high of $213.01. The stock pulled back to close at $210.15, gaining around 3%.
The deal comes after Sherwin-Williams ended its pursuit of Comex s Mexican business. Sherwin-Williams agreed to buy Comex for $2.34 billion. The company completed the acquisition of Comex.
However, Sherwin-Williams appeal related to the acquisition was denied and the acquisition was declared unauthorized by the Federal Economic Competition Commission (FECC) in Mexico. The Mexican antitrust regulator rejected the deal citing that the merger allows the combined company to set high prices and commit anti-competitive practices, which damages consumer interests.
With the stock purchase agreement, either Sherwin-Williams or Comex had the right to end the deal before Mar 31, 2014. Comex accused Sherwin-Williams for breaching its obligations by not using all its efforts to close the deal.
The acquisition is fit and complementary to PPG Industries as boosts its foothold in Mexico by offering architectural coatings portfolio. The deal broaden its global coatings business.
PPG Industries expects the transaction to be accretive to its earnings, barring acquisition costs. It expects to achieve acquisition-related synergies of 3%-4% over 2 years.
PPG Industries plans to finance the deal with its existing cash and short-term investments as it may fund the purchase consideration by raising debt.
PPG Industries is taking steps to grow its business by making acquisitions. The acquisition of Akzo Nobel s North American architectural coatings business strengthened its branded paint product in the North American architectural market.
PPG Industries acquired assets of coatings company Deft Incorporated in an effort to boost its position in the aerospace industry. The acquisition of Hi-Temp Coatings Technology also strengthens PPG Industries protective and marine coatings business. The Canal Supplies helps it to expand its protective and marine coatings business in Central America.