Sherwin-Williams chief holding out for Trump in Valspar deal
New York Post
19th December 2016
No Fortune 500 chief executive could more be looking forward to Donald Trump getting sworn in as president than John Morikis. The boss at has run into a tough Federal Trade Commission review of its — and has told the regulator it will not increase the amount of asset sales it offered months ago, The Post has learned. The FTC has hinted Morikis will have to increase those sales to get antitrust clearance.
But Morikis is standing firm — in essence telling the regulator he believes he will get a better deal from a FTC, sources said. The FTC, under current Chair Edith Ramirez, who is expected to be replaced on Jan. 20, has in the past two weeks taken the unusual step of asking Lowe’s, Valspar’s biggest customer, to offer its view on the deal, sources said.
In fact, the FTC said it would issue a subpoena to get a response if Lowe’s didn’t comply, sources said. Lowe’s, which represents about 20 percent of Valspar’s sales — and promotes only Sherwin and Valspar — responded and told the FTC it does not want to see the merger, sources said. Sherwin, America’s biggest paint company with about a 40 percent market share, has agreed to a $ deal to buy Valspar, the US’s No.
4 paint maker. “It sounds to me like the [FTC] is talking about suing Sherwin [to stop the deal] or they want a bigger divestment,” a source said, noting it now has Lowe’s as a witness. Sherwin offered a relatively small divestiture package in October, including selling Valspar’s wood finishing business.
Ramirez’s FTC rejected the offer. Morikis, though, appears primed to play hardball in the waning weeks of the Obama administration, and is not offering more, two sources said. “They believe the staff at the FTC will soften because of Trump’s win,” one source said.
“As long as Sherwin remains tough, they think there is a good chance they close the deal at $113 per share. ” The deal price is cut to $105 a share if Sherwin is forced to divest assets with 2015 revenue of more than $650 million. “If you were a poker player, it might be a good time to bluff a little,” a source close to Sherwin said.
Valspar’s shares closed Friday at $104. 52, up 1. 5 percent.
That price could drop below $80 — where it was trading in the weeks before the March takeover deal — if the deal falls apart, sources said. Morikis’ tough stance could be attributable, in part, to Steven Newborn, the Weil Gotshal lawyer representing the paint maker. Newborn represented Staples last year when it agreed to buy Office Depot and took a hard line with the FTC — daring it to sue to block the deal.
In the Staples case, a judge blocked the merger after the FTC sued to stop it. “Steve likes to play a little bit of brinksmanship and he seems to be doing it here,” a source said. in a statement, said it is cooperating with the FTC and “continues to expect the transaction will close by [March 31]” with zero or minimal divestitures.
The FTC and Lowe’s declined to comment. Newborn did not return a call for comment..
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