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03/21/2016

The Sherwin-Williams Company to Acquire Valspar $11.3B

Paint company Sherwin-Williams will acquire Valspar for approximately $11.3 billion. The Sherwin-Williams Company and The Valspar Corporation have entered into a definitive agreement under which Sherwin-Williams will acquire Valspar for $113 per share in an all-cash transaction, or an enterprise value of approximately $11.3 billion.  At $113 per share, the transaction, which has been unanimously approved by the Boards of Directors of both companies, represents a premium of approximately 41% to Valspar's volume weighted average price for the 30 days up to and including March 18, 2016.

Founded in 1866, The Sherwin-Williams Company is a global company in the manufacture, development, distribution, and sale of coatings and related products to professional, industrial, commercial, and retail customers. Sherwin-Williams branded products are sold exclusively through a chain of more than 4,100 company-operated stores and facilities.

Sherwin-Williams and Valspar have highly complementary paints and coatings offerings and this combination enhances Sherwin-Williams position as a global paints and coatings provider.  The transaction results in an exceptional, diversified array of strong brands and technologies, accelerates Sherwin-Williams growth strategy by expanding its global platform in Asia-Pacific and EMEA, and also adds new capabilities in the packaging and coil segments.

The combined company would have pro forma 2015 Revenues and Adjusted EBITDA (including estimated annual synergies) of approximately $15.6 billion and $2.8 billion, respectively, with approximately 58,000 employees.

"Valspar is an excellent strategic fit with Sherwin-Williams," said John G. Morikis, President and CEO of The Sherwin-Williams Company. "The combination expands our brand portfolio and customer relationships in North America, significantly strengthens our Global Finishes business, and extends our capabilities into new geographies and applications, including a scale platform to grow in Asia-Pacific and EMEA.  Customers of both companies will benefit from our increased product range, enhanced technology and innovation capabilities, and the transaction's clearly defined cost synergies. We have tremendous respect for the expertise and dedication of the Valspar team and we are excited about the opportunities that this combination will provide to both companies' employees."  

Sherwin-Williams will continue to be headquartered in Cleveland as the company intends to maintain a significant presence in Minneapolis.

Morikis added, "Sherwin-Williams has a long track record of successfully integrating acquisitions. We are highly confident in the industrial logic of the transaction and, once closed, our ability to achieve $280 million of estimated annual synergies in the areas of sourcing, SG&A and process and efficiency savings within two years and our long-term annual synergy target of $320 million.  We expect this transaction to be immediately accretive excluding one-time costs and meaningfully enhance our cash flow generation profile."

Gary E. Hendrickson, Chairman and Chief Executive Officer of Valspar, said, "We believe that Sherwin-Williams is the right partner to utilize our array of brands and create a premier global coatings company."

The transaction is expected to close by the end of Q1 calendar year 2017, and is subject to the approval of Valspar shareholders and customary closing conditions, including the expiration or termination of the applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act and regulatory approvals in various other jurisdictions.  Both companies believe that the combination will benefit customers and that it will receive all necessary regulatory clearances.

Sherwin-Williams intends to finance the transaction through a combination of cash on hand, liquidity available under existing facilities and new debt.  Sherwin-Williams has obtained committed bridge financing from Citigroup Global Markets Inc. in support of the transaction and is committed to maintaining its current dividend and rapid deleveraging using significant free cash flow.

Citi acted as the lead financial advisor to Sherwin-Williams and J.P. Morgan Securities LLC also acted as financial advisor.  Jones Day and Weil, Gotshal & Manges LLP are acting as legal advisors to Sherwin-Williams.  Goldman Sachs and BofA Merrill Lynch are acting as financial advisors to Valspar and Wachtell, Lipton, Rosen & Katz is acting as its legal advisor.