PPG Industries to acquire Mexico's Comex for $2.3 billion

13:32 PM | June 30, 2014 | Robert Westervelt

PPG Industries has reached a definitive agreement to acquire Consorcio Comex (Mexico City), a leading Mexican producer of architectural and industrial coatings, for $2.3 billion. The deal follows two months after Sherwin-Williams (SW) cancelled plans to acquire the Mexican operations of Comex for $2.3 billion after Mexico’s federal competition commission blocked the deal. 

The privately held Comex has approximately 3,900 employees, eight manufacturing facilities, and six distribution centers, and had sales of approximately $1 billion in 2013. Comex sells coatings and related products in Mexico and Central America through approximately 3,600 stores that are independently owned and operated by more than 700 concessionaires. The deal is subject to regulatory approvals and other customary reviews. PPG expects the regulatory review to take four to six months. PPG says the deal is its largest since the 2008 acquisition of SigmaKalon for €2.2 billion (US$3.2 billion).

SW''s attempted acquisition of Comex was announced in November 2012 and abandoned in April 2014 after failing to secure antitrust approvals in Mexico. SW did successfully acquire Comex’s US and Canadian operations for $165 million in September 2013.

“Comex is a high-quality, well-managed business with a long heritage of excellent customer service and leading, well-recognized regional brands,” says Charles Bunch, PPG chairman and CEO. “The acquisition is very complementary to PPG, as it adds a leading architectural coatings business in Mexico and Central America, a region where we have negligible architectural coatings presence.”

PPG plans to use cash and short-term investments on hand for the purchase, but Bunch indicates that the company may fund a portion by adding debt. The deal will be immediately accretive to earnings excluding nonrecurring acquisitions costs, the company says. PPG also expects acquisition-related savings of 3–4% of acquired sales to be achieved over two years.

PPG reports $3 billion of cash and short-term investments on hand as of 31 March. The company completed the sale of its 51% ownership interest in Transitions Optical in March and received after-tax proceeds of $1.5 billion. PPG’s board in April approved a $2-billion share repurchase authorization and increased the quarterly dividend payable 12 June by 10%.

“This acquisition is consistent with our stated strategy to expand our global coatings business portfolio,” Bunch says. “Following this transaction, we will continue to have a strong cash balance, expanded free cash flow, and a high degree of financial flexibility, and we expect additional, disciplined cash deployment focused on value creation for our shareholders.”

HSBC advised Comex on the sale.