A big merger in paint, a slow-growth industry

Scott Tong Mar 21, 2016
HTML EMBED:
COPY
A guest attends the HGTV HOME by Sherwin-Williams and Lowe's event. Bryan Bedder/Getty Images for HGTV Home by Sherwin-Williams & Lowe's

A big merger in paint, a slow-growth industry

Scott Tong Mar 21, 2016
A guest attends the HGTV HOME by Sherwin-Williams and Lowe's event. Bryan Bedder/Getty Images for HGTV Home by Sherwin-Williams & Lowe's
HTML EMBED:
COPY

Sherwin-Williams, a historic paint brand based in the industrial Midwest, is buying another of the same kind – Valspar — for $9 billion.

But they are in different segments of the paint market, and as investors demand more growth from all companies, this tie-up could provide that new, shiny coat.

The Sherwin-Williams logo famously says “cover the earth,” though the company has mostly covered just North America.

Its old-but-proven model is to open some 4,000 stores in the U.S. and target a particular customer.

“Where they have a very strong presence is with the paint contractors,” said Mike Harrison, an analyst at Seaport Global Securities. “Kind of the local store no matter where you’re doing a job, that you can get your brushes, your paint, your dropcloths, etcetera.”

Sherwin-Williams incorporated in Cleveland 132 year ago. Valspar, based in Minneapolis, goes back to 1804. Its product coated ship masts and the Spirit of St. Louis.

But lately it’s targeted homeowners, said Dmitry Silversteyn at Longbow Research.

“Valspar is a dominant supplier of paint to Lowe’s, for example, and also has products at Ace Hardware,” he said. “It helps them with reaching the do-it-yourself customer for paint.”

Valspar has a bigger presence globally, and in the industrial sector. So they complement, and don’t drip on each other’s business much.

It’s just a slow and steady business, but Wall Street demands more.

“You either have to do some acquisition work, like what’s going on now, or expand outside typical regions and go into China,” said Eric Linak at IHS Chemical.

The Asia market is where the growth is. The challenge now for Sherwin-Williams is its China branding. The current translation — xuan wei weilian mu si – sounds a little clunky.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.