Susquehanna: Sherwin-Williams Worth $370/Share After Valspar Acquisition

Susquehanna’s Don Carson upgraded the rating on Sherwin-Williams Co SHW from Neutral to Positive, while raising the price target from $260 to $370, following the announcement that the company has entered into an agreement to acquire The Valspar Corp VAL.

Acquiring Valspar

Sherwin-Williams announced it has entered into an agreement to acquire Valspar for $113 per share, representing a 41 percent premium to the latter company’s trailing 30-day average share price.

“We believe the deal to be accretive to cash EPS by close to $4.00 by 2018 including at least $2.05 in synergies,” Carson stated, while adding, “The transaction strengthens SHW's Consumer Group which sells architectural paint through third party retailers in the US as well as its Global Finishes group which sells industrial coatings.”

Carson believes there is little antitrust risk to the deal, since the two companies use different architectural channels in the U.S. and there is no overlap in the industrial coating business.

Competing Bids Unlikely

In addition, competing bids are unlikely, especially given that Akzo Nobel has recently exiting the North American architectural coating market, while PPG Industries, Inc. PPG has an “overlapping architectural position at Lowes and overlap in packaging and coil coatings.”