Blizzard of Acquisitons Hits the Paint Sector

Global coatings demand An estimated $88 billion global market Source: Euromonitor, via Sherwin-Williams at the Citi Basic Materials Symposium

At the close of 2007, it was almost hard to see through the blizzard of acquisitions in the paint and coatings sector, as it seemed nearly every player in the market place was making announcements, finalizations or new bids to build their global businesses.

PPG will see a sharp expansion of its worldwide offerings when it acquires Sigma Kalon Group, a Netherlands-based producer of architectural, decorative and protective coatings, as well as coatings for the marine and industrial markets.

The approximately $3.22 billion deal was approved in mid-December by European Union regulators. The acquisition will secure PPG’s status as the second largest paint manufacturer worldwide.

While PPG has manufacturing facilities and other operations in 25 countries, Sigma Kalon sells coatings in more than 40 countries. Sigma Kalon Group is owned by Bain Capital Partners, a private investment firm which gained interests in a number of home improvement companies in 2007, including HD Supply and American Standard.

Sigma Kalon makes decorative coatings under several international brands, including Avi, Eureka and Prominent Paints. Sigma Kalon products are sold throughout Eastern and Western Europe, Africa and Asia. PPG brands include Pittsburgh Paints, olympic, Monarch, Porter Paints and Manor Hill.

Further demonstrating the depth of consolidation in the paint industry, PPG has been a rumored buyer of Akzo Nobel’s Crown paints brand. Akzo, in turn, acquired Crown as part of its own major acquisition of Imperial Chemical Industries (ICI), parent of Glidden, Dulux and Liquid Nails. To appease European Union regulators, Akzo agreed to sell Crown in order to complete its acquisition of ICI. Akzo completed its acquisition of ICI on Jan. 2—ICI’s shares ceased to be listed on the London Stock Exchange on Jan. 3.

Akzo made its first approach for paint manufacturer and retailer ICI in June and raised its offer three times, eventually settling on a $15.8 billion price tag. The acquisition will create the second largest manufacturer of paint in the United States next to Sherwin-Williams, and the largest manufacturer of paint and coatings in the world.

Other major paint companies are expanding further overseas, while large U. S. companies continue to tout the benefits of the United States market, even in a housing down turn. Valspar president and CEO William Mansfield commented on the series of acquisitions in the coatings industry, speaking at the Citi Basic Materials Symposium in New York last month.

“Valspar’s global expansion has increased the diversity of our end-market reach and also our geographic reach,” Mansfield said. “The coatings industry continues to consolidate. Five years ago, the top 10 (coatings companies) had about 45 percent of the total market and today they have around 60 percent, and that trend is expected to continue.”

Cleveland-based Sherwin-Williams made a series of acquisitions of its own this year. The company attributed third-quarter gains to acquisitions, including the assets of Columbia Paint & Coatings, purchased at the end of the first quarter. Other acquisitions included the earlier purchase of M.A. Bruder & Sons—combined with Columbia, the two acquisitions added 172 stores to the group’s operations.

Sherwin-Williams chairman and CEO Christopher Connor, also speaking at the Citi Basic Materials Symposium, reasserted Sherwin-Williams’ spot in the global market as well as its dominance in the U.S. market.

“Sherwin remains the third largest coatings company in the world, and number one in the United States by a wide margin,” Connor noted. “Despite all the doom and gloom about this part of the world, we’re finding avenues and opportunities for growth.”

Connor said, however, that Sherwin-Williams still will cast an eye to the global market this year.

“We are bullish on the United States market,” Connor said. “But…about half of the six or seven acquisitions we will make this year will be outside the United States.”

Stateside, one more familiar name made a notable acquisition—on Dec. 13, Benjamin Moore announced it would purchase select assets and brands of Insl-x Products Corp., a coatings manufacturer based in Stony Point, N.Y.

Insl-x manufactures primers, sealers and specialty coatings for cabinetry and garage floors. The company has plants in Stony Point, as well as in Edgewater, Fla.; Baltimore; and Mineral Wells, Texas. The company also has distribution centers in Illinois, Nevada, Texas and Alaska.

According to Denis Abrams, president and CEO of Benjamin Moore, the acquisition is a strategic move that provides Benjamin Moore with several brands and coatings products, including Insl-x, Coronado, Bruning, Trinity Lacquers and Lenmar.

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