PPG Industries offers $2.3 billion bid for Mexican paints company


After Sherwin-Williams in April dropped its longstanding offer to buy Consorcio Comex SA de CV, securities analysts speculated that Downtown-based PPG Industries might step up and acquire the giant Mexican paints producer.

On Monday, PPG made good on those theories when it announced its own $2.3 billion bid for Comex, in a deal that could make the Pittsburgh company the largest coatings maker in the world.

The offer just about matches the price that Cleveland-based Sherwin-Williams planned to pay before antitrust authorities blocked that deal, saying the combined company would hold almost 60 percent of the Mexican paint market.

PPG officials are confident their deal will pass muster with regulators because the Pittsburgh company has “a negligible architectural coatings presence” in Mexico and Central America, said PPG Chairman and CEO Charles Bunch.

“We are confident we can get this transaction approved by regulatory authorities in Mexico because we have no footprint or business in architectural coatings in Mexico,” Mr. Bunch told analysts in a conference call Monday after PPG disclosed its plans.

PPG’s shares soared to a 52-week high of $213.01 on the news before closing at $210.15, up $6.10 in trading on the New York Stock Exchange.


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In a report issued Monday, New York brokerage Jeffries LLC said, “The odds are at least better than Sherwin’s recent attempt” that regulators will approve the PPG-Comex deal.

“Comex is quite complementary to PPG’s existing portfolio,” Jeffries analysts wrote. “Given that coatings brands are regional, not global, acquisitions matter more than advertising when entering a new geography.”

Jeffries also projected that if PPG buys Comex, it will become the largest coatings company in the world with a 12 percent global market share, edging out Dutch paints maker Akzo Nobel which would have an 11 percent share. Sherwin-Williams would be the third largest worldwide.

The proposed acquisition — expected to be under regulatory review for four to six months — would be the second-largest in PPG’s history after its 2008 purchase of Dutch paints company SigmaKalon for approximately $3.2 billion.

Last year, PPG acquired Akzo Nobel’s North American architectural paints business for $1.05 billion in a deal that brought Glidden and other brands into the Pittsburgh company’s portfolio and broadened its retail footprint in North America to nearly 1,000 company-owned stores, 6,000 independent dealers, and 8,000 home centers like Home Depot and Lowe’s.

With the Comex deal, PPG aims to gain a strong presence in Mexico, where Comex brands are sold in more than 3,500 stores; and in other Latin American countries where Comex has a smaller network, including Guatemala, Honduras, Nicaragua and Panama.

The acquisition would boost PPG’s Latin American business from 5 percent to 11 percent of its global sales, which topped $15 billion last year. North America still accounts for the largest share with 45 percent of PPG sales coming from the U.S. and Canada last year.

The deal would also help seal PPG’s decade-long strategic transformation from an old-line glass, chemicals and paints manufacturer to a company almost totally focused on coatings. Including Comex’s sales, coatings would account for 93 percent of PPG’s global revenues in 2013.

Privately-held Comex, based in Mexico City, generated sales of about $1 billion last year. Its products are sold in 3,600 stores and it maintains eight manufacturing plants and six distribution centers. The company employs almost 4,000.

Though Sherwin-Williams didn’t succeed in buying Comex’s Latin American paints business, the Ohio company acquired the Comex operations in the U.S. and Canada last September for $165 million.

“We are excited to proudly join the PPG team,” said Marcos Achar Levy, chief executive of Comex. “Being part of PPG gives us new opportunities and synergies that will allow us to continue to significantly grow in our markets.”

PPG plans to fund the Comex purchase primarily using cash and short-term investments. But Mr. Bunch did not rule out taking on debt. “Between now and the closing, we’ll analyze the best way” to complete the deal, he said.


Joyce Gannon: jgannon@post-gazette.com or 412-263-1580. First Published June 30, 2014 12:00 AM

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