FTC rejects Sherwin-Williams’ concessions in Valspar deal: sources

Josh Kosman

New York Post

28th October 2016

President Obama’s Federal Trade Commission is painting into a corner. America’s largest paint company, in March agreed to buy rival Valspar for $113 a share, or $11. 3 billion — and recently offered the FTC some concessions to get the deal approved.

But the FTC has rejected the offer, The Post has learned. To be sure, an agreement may still be reached and the deal approved. “I don’t think this gets through the FTC without significant divestitures, if it goes through at all,” a DC source closely following the situation said.

Valspar’s shares fell 7 percent on Friday, to $97. 73, after nypost. com broke the news about the FTC rejection.

Under the terms of the deal, if is required to sell assets totaling more than $650 million of Valspar’s revenue to win regulatory approval, the price drops to $105. Sherwin’s FTC offer was to sell assets with revenue of $650 million or less, sources said. Valspar’s share price could drop below $80 if the deal falls apart.

The FTC, which earlier this year successfully blocked Staples from buying Office Depot, and is raising serious concerns about Walgreens acquiring Rite Aid, is skeptical about this merger. The main problem is the two merging companies are the two promoted by Lowe’s. Lowe’s, at the least, has not told the FTC it supports the merger, a source said.

If it objects because it believes the combined company will have too much pricing power, that would be serious trouble for the deal, sources said. There is some belief Valspar agreed to the sale only because its financial state was weakened after in 2014 struck a deal to sell house paints at Lowe’s, Valspar’s No. 1 customer.

Valspar, in its 2015 second quarter earnings call, said, “The decline in paints revenue was the result of the Lowe’s product lineup change. ” has roughly a 37 percent market share and some 4, 000 retail stores. Valspar has a 7 percent share.

Warren Buffett’s Benjamin Moore is the most likely buyer of divested paint products, but it has intentionally stayed away from the space, the DC source said. “This is a tricky divestiture,” the source said. the FTC and Lowe’s declined comment.



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