Sherwin Takes Comex

Sherwin-Williams has agreed to acquire Mexico’s Consorcio Comex for $2.34bn, it says. The US paint maker is to pay cash, and will also assume an unspecified amount of debt, in order to gain access to a higher-growth Mexican market. The sale of family-owned Comex is heard to come at the end of a competitive bidding process involving multiple parties. Analysts found it difficult to determine the multiple implied in the transaction, given that the target is privately held, but generally considered the deal to be positive. Sherwin says the transaction value comes at about 1.7x sales, in the only measure of valuation it divulges. Comex had total sales of $1.4bn in 2011, 34% of which came from US and Canada operations. Sherwin sees the deal doubling its business in LatAm. “While the financial details (primarily EBITDA) remain unclear, we view the deal as strategically accretive to the Sherwin-Williams franchise as it extends the company’s already impressive distribution network to Mexico and Latin America,” equity research firm Robert W. Baird says in a report. “Adding Comex provides additional exposure and scale in Latin America and should ultimately add to earnings,” Hilliard Lyons says, highlighting that Comex provides additional exposure to fast-growing markets. It is expected to benefit from Mexico’s active homebuilding sector, which is driven by government mortgage lending and favorable demographic and economic trends. Comex also offers exposure to the Western US, where Sherwin is seen as less strong. Sherwin expects the deal to be EPS dilutive in the initial quarter, and EPS accretive within 12 months. It plans to issue bonds to fund the purchase, it says. The transaction is subject to regulatory approval. Comex was advised by HSBC and White & Case. Jones Day was legal advisor to Sherwin, which does not respond to requests for comment on any financial advisor or additional financial details of the transaction. The sale is the largest takeover of a Mexican company b