Global paint giant PPG Industries Inc. (PPG) stated that it has received a notice from Mexico’s Federal Economic Competition Commission (FECC) for extending the review time limit of the pending PPG-Comex acquisition deal. The commission would have had to rule on PPG’s regulatory filing within a few days if the timeframe had not been extended.
On Jun 30, 2014, PPG announced its decision to buy Mexico’s leading paint company – Consorcio Comex S.A. de C.V. – for $2.3 billion to reinforce its architectural coatings business in Mexico and Central America. PPG had then expected 4-6 months for regulatory review considering the magnitude of the deal. It now plans to close the deal in the fourth quarter of this year.
Comex, a privately held company, which recorded revenues of roughly $1 billion last year, is engaged in the manufacture of architectural and industrial coatings and related products. The company commands a strong presence in key Mexican markets with 8 manufacturing facilities and 6 distribution centers and nearly 3,600 stores in Mexico and Central America through which it markets its products.
In Sep 2013, PPG’s rival Sherwin-Williams (SHW) had completed the acquisition of the U.S. and Canadian businesses of Comex. However, in November, the FECC declaredthe deal to be unauthorized. Prior to that, in July, the Mexican antitrust regulator rejected the deal citing that the combined entity will set artificially high prices and engage in anti-competitive practices, thereby damaging consumer interests. In Apr 2014, the deal fell through and PPG stepped in to acquire Comex.
Under the stock purchase agreement, either Sherwin-Williams or Comex had the right to end the deal if it did not consummate on or before Mar 31, 2014. Comex, however, accused Sherwin-Williams of breaching its obligations under the deal by not resorting to commercially reasonable means to close the deal.
The Comex acquisition would be a strategic fit for PPG Industries as it will boost its foothold in Mexico and Central America by offering a leading architectural coatings portfolio. The deal is also in sync with the company’s strategy to broaden its global coatings business.
PPG currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the diversified chemical space include Valhi, Inc. (VHI) and LyondellBasell Industries N.V. (LYB). While Valhi sports a Zacks Rank #1 (Strong Buy), LyondellBasell carries a Zacks Rank #2 (Buy).
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