Fitch Comments on Sherwin-Williams' Acquisition of U.S./Canada Business of Comex

Mon Sep 16, 2013 2:09pm EDT

(The following statement was released by the rating agency) CHICAGO, September 16 (Fitch) The Sherwin-Williams Company (NYSE: SHW) announced today that it has completed the acquisition of the U.S./Canada business of Consorcio Comex, S.A. de C.V. (Comex). SHW will pay $90 million in cash and assume liabilities currently valued in the range of $75 million. In November 2012, SHW announced the proposed acquisition of Comex for $2.34 billion. Comex is a privately held business with operations in Latin America, the U.S. and Canada. In 2011, Comex had $1.4 billion in sales, 66% of which was generated in Mexico and the remaining 34% in the U.S. and Canada. On July 17, 2013, the Federal Competition Commission of Mexico (FCCM) informed SHW that the acquisition was not authorized by the FCCM by a 3-2 vote of its members. SHW's management said that the company and Comex remain fully committed to securing regulatory approval from the FCCM for SHW to complete the acquisition of the operations of Comex in Mexico. SHW and Comex have amended the Stock Purchase Agreement to extend the exclusivity period to March 31, 2014. COMEX U.S./CANADA OPERATIONS In the U.S., Comex sells paint and coatings products under a variety of brand names through 234 company-operated paint stores. In Canada, the company markets multiple brands of paint and coatings through 80 company-operated paint stores and approximately 1,500 independent paint dealers. Fitch believes that the acquisition of the U.S./Canadian operations has good strategic rationale for SHW. The acquisition augments its current business mix and provides the company with a meaningful controlled distribution platform in the western U.S. and Canada, where its store count is currently low. RECENT RATINGS DOWNGRADE In May 2013, Fitch downgraded SHW's ratings, including the company's Issuer Default Rating (IDR), to 'A-' from 'A'. The downgrade primarily reflected Fitch's view of SHW's high leverage following the acquisition of Comex (U.S./Canada as well as operations in Mexico) and integration risks associated with this large transaction and takes into account normalized leverage post integration. While the company has successfully integrated smaller acquisitions in the past (i.e. Duron, Purdy, M.A. Bruder), there is greater risk because the Comex acquisition is significantly larger and also involves meaningful operations in foreign jurisdictions (Mexico and Canada). Fitch will continue to monitor SHW's progress in receiving regulatory approval from the FCCM regarding its proposed acquisition of the operations of Comex in Mexico. Should SHW not complete the acquisition of Comex's operations in Mexico, Fitch will reassess the current ratings for SHW. Fitch currently rates SHW with a Stable Outlook as follows: --Long-term IDR 'A-'; --Senior unsecured notes 'A-'; --Unsecured bank credit facilities 'A-'; --Short-term IDR 'F2''; --Commercial Paper 'F2'. Contact: Primary Analyst Robert Rulla, CPA Director +1-312-606-2311 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Robert Curran Managing Director +1-212-908-0515 Committee Chairperson Megan Neuburger Senior Director +1-212-908-0501 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article