Valspar Boosts Coatings Range with Madison Chemical Buy

Paints and coatings maker The Valspar Corporation (VAL) has bought Canada-based coatings maker Madison Chemical Industries, Inc. Financial terms of the deal were not divulged.

Madison is a renowned global manufacturer of technically-advanced products that have applications in critical infrastructures such as water transmission pipelines, water and wastewater management and potable water storage.

The acquisition has enabled Valspar to broaden its coatings portfolio into water infrastructure and wastewater management markets. The combination of the company’s current pipe coating products, global manufacturing and technical resources with Madison’s vast experience and qualifications in the water infrastructure market will offer their customers with a broad spectrum of solutions.

Valspar’s shares ticked up 0.5% to $85.17 in the trading session last Thursday before pulling back to close the day lower at $84.84. The stock is up around 20% this year based on last Friday’s close.

Valspar has a strong pipeline of new products and significant opportunities for share gains in both its Paints and Coatings segments. The company continues to see strength in its coatings business as evidenced by new business wins. Valspar is also managing its cost well and maintaining a cost structure that is appropriate for the current external environment.

Winning new businesses remain a company-wide focus that will position Valspar well for the future. The acquisition of paint manufacturing assets of Ace Hardware boosted its retail foothold in the U.S. The company is making a good progress with the integration of the acquired business. Moreover, Valspar has strengthened its position in the $6 billion European industrial coatings market with the takeover of Italy-based industrial coatings maker Inver Holding S.r.l.

However, the overall demand environment remains uneven. Coatings demand for general industrial products, mainly for off-road equipment, pipelines and shipping containers, remains somewhat weak.

In addition, high spending to support new retail programs and brand-building actions may affect margins in the company's paints business in fourth-quarter fiscal 2014, as did in the third. The company will report its fourth quarter results on Nov 25.

Valspar is a Zacks Rank #3 (Hold).

Other companies in the specialty chemicals space with favorable Zacks Rank include Minerals Technologies Inc. (MTX), Ferro Corporation (FOE) and The Sherwin-Williams Company (SHW). While Minerals Technologies holds a Zacks Rank #1 (Strong Buy), both Ferro and Sherwin-Williams retain a Zacks Rank #2 (Buy).