TEXT-Fitch places Sherwin-Williams ratings on watch negative

Tue Nov 13, 2012 10:13am EST

Nov 13 - Fitch Ratings has placed The Sherwin-Williams Company's 
(NYSE: SHW) ratings on Rating Watch Negative following the company's proposed
acquisition of Consorcio Comex, S.A. de C.V. (Comex). SHW has signed a
definitive agreement to acquire Comex for $2.34 billion, including assumed debt,
in an all-cash transaction. The transaction is expected to close during the
first quarter of 2013.

Fitch has placed SHW's ratings on Watch Negative as follows:

--IDR 'A';
--Revolving bank credit facilities 'A';
--Senior unsecured debt 'A';
--Short-term IDR 'F1';
--Commercial paper (CP) 'F1'.

Comex is a privately held business with operations in Latin America, the U.S.
and Canada. In 2011, the company had $1.4 billion of sales, 66% of which was
generated in Mexico and the remaining 34% in the U.S. and Canada. Comex
manufactures and sells architectural and industrial coatings in Mexico through
3,300 points of sale operated by 750 independent concessionaires. In the U.S.,
Comex sells paint and coatings products under a variety of brand names through
240 company-operated paint stores. In Canada, the company markets multiple
brands of paint and coatings through 78 company-operated paint stores and
approximately 1,500 independent paint dealers.

The proposed acquisition has good strategic rationale for SHW. The acquisition
augments its current business mix and provides the company with a meaningful
controlled distribution platform in Mexico, the western U.S. and Canada, where
its store count is currently low. The acquisition also improves SHW's scale
throughout Latin America and provides the company with strong brand names in
that region.

While Fitch views the transaction as strategically positive for SHW, the
company's long- and short-term IDRs are likely to be downgraded to 'A-' and
'F2', respectively, given the large amount of debt to be assumed in the
acquisition and the resulting increase in leverage. Leverage as measured by debt
to EBITDA will increase from 0.8x for the LTM period ending Sept. 30, 2012 to
approximately 3x at the close of the transaction. (This assumes that SHW borrows
roughly $2.4 billion of debt and does not include EBITDA contribution from
Comex.) Fitch expects leverage will remain at or above 2x for the 18-24 months
following the closing of the transaction with the expectation of some debt
repayment and EBITDA contribution from Comex.

Fitch expects to resolve the Rating Watch Negative upon the closing of the
transaction and review of SHW's financial profile.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology
FILED UNDER:
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