Coatings giant PPG Industries (PPG) has secured a favorable ruling from Mexico’s Federal Economic Competition Commission (“FECC”) on its earlier announced deal to buy leading Mexican paint company – Consorcio Comex S.A. de C.V.
PPG Industries agreed to buy Comex in Jun 2014 for $2.3 billion. The company received the approval of Mexico’s National Foreign Investment Commission in mid-Oct 2014. PPG Industries, last month, said that FECC has extended the review timeline of the Comex acquisition deal.
With the favorable FECC ruling, PPG has secured all the required government approvals for the acquisition. The company expects to complete the transaction in the next several days.
PPG Industries stepped in to buy Comex after U.S. paint major Sherwin-Williams (SHW) ended its pursuit of Comex’s Mexican business in Apr 2014. Sherwin-Williams’ appeal related to the acquisition of Comex’s core Mexican business was denied and the acquisition was declared unauthorized by the FECC in Nov 2013.
Privately-held Comex, which had revenues of roughly $1 billion last year, makes architectural and industrial coatings and related products in Mexico. The company has 8 manufacturing facilities and 6 distribution centers and markets its products through over 3,700 stores in Mexico and Central America.
The acquisition is a strategic fit and highly complementary to PPG as it will boost its foothold in Mexico and Central America by offering a leading architectural coatings portfolio. The deal is in sync with the company’s strategy to broaden its global coatings business.
PPG Industries expects the transaction to add 65 cents to 75 cents to its earnings per share, barring acquisition and financing costs, in 2015. It also expects to achieve acquisition-related synergies of $30 million to $40 million over two years.
While PPG plans to finance the deal with its existing cash, it may fund a part of the purchase consideration using debt. The company had cash and short-term investments of $3 billion at the end of third-quarter 2014.
PPG Industries is a Zacks Rank #3 (Hold) stock.
Other chemical stocks worth considering include Celanese Corp. (CE), Huntsman Corp. (HUN) with both holding a Zacks Rank #2 (Buy).
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