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Sherwin-Williams Ends Bid for Comex

Tuesday, April 8, 2014

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After nearly a year and a half, America’s largest paint retailer has ended its pursuit to purchase Mexico’s largest paint maker—a $2.34 billion bid that has been quashed by Mexico’s antitrust regulators twice.

In a brief announcement Friday (April 4), The Sherwin-Williams Company said it had sent notice to the sellers that, effective immediately, it was terminating its amended and restated stock purchase agreement, dated Sept. 16, 2013, to acquire the Mexican operations of Consorcio Comex, S.A. de C.V..

Images: Sherwin-Williams

Sherwin-Williams acquired 314 Comex stores in U.S. and Canada, but has ended its long-running effort to acquire the coating maker's Mexican operations.

In addition, Sherwin-Williams said it had been "incorrectly" accused of breaching the agreement and asked the Supreme Court of New York to declare it had used commercially reasonable efforts to complete the acquisition.

The company first announced plans to acquire Comex in November 2012.

Because the deal hadn’t closed by March 31, 2014, Sherwin-Williams said that under the terms of the agreement, either party could cancel without being in material breach.

Deal Rejections

Sherwin-Williams completed the $90 million acquisition of Comex's North American business in September 2013, but the Federal Competition Commission of Mexico blocked the acquisition of Comex's Mexico operation—by far, the largest part of its business.

Several months later, the commission rejected the paint maker's appeal of the decision.

The deal would have doubled the Cleveland, OH-based company’s presence in Latin America.

Sherwin-Williams store

Both companies assumed the $2.34 billion deal would go through, the deal would have doubled Sherwin-Williams presence in Mexico.

Mexico's Federal Competition Commission was established in 1993 to enforce the country's then-new Federal Law of Economic Competition. As such, the commission regulates mergers and acquisitions and is charged with preventing monopolistic behavior.

After the first rejection, the commission said the acquisition would give the combined company 48 percent to 58 percent of the regional market share—10 times that of its closest competitor.

After each denial, Sherwin-Williams said it would review the commission’s decision and consider all options.

On March 7, Sherwin-Williams announced in a statement that it had met with the commission “to discuss the Company’s ongoing effort to acquire the Comex business in Mexico.” It noted that it had not re-filed its appeal with the commission at that time.

Accusation of Breach

On April 1, Comex said Sherwin-Williams breached the agreement to use “commercially reasonable efforts,” according to Sherwin-Williams.

In its statement, the coatings company noted that it is seeking a declaratory judgment from the Supreme Court of the State of New York that Sherwin-Williams used commercially reasonable efforts as required under the stock purchase agreement and had not breached the agreement.

Sherwin-Williams said it would comment further upon release of its first-quarter 2014 earnings report, set for April 17.

The Comex Group released no statement on the deal.

Comex Deal

Founded in 1952, Comex, headquartered in Mexico City, operates eight manufacturing sites in Mexico and is the fourth-largest architectural paint manufacturer in North America. It also manufactures industrial, protective and specialty coatings.

Its brands include General Paint, Parker Paint, Frazee Paint, Kwal Paint and Color Wheel.

The company had total annual sales of $1.4 billion in 2011. 

In announcing the deal in 2012, Sherwin-Williams chairman and CEO Christopher M. Connor called it "an exciting step forward in our ongoing effort to bring these two respected companies together" and said the companies were a "good strategic fit."


Sherwin-Williams chairman and CEO Christopher M. Connor called the Comex acquisition a "good strategic fit" and expressed disappointment with the regulatory rejections.

Meanwhile, Comex CEO Marcos Achar Levy said his company was "delighted" by the deal and looked "forward to making a major contribution to [Sherwin-Williams'] ongoing success across the Americas."

Founded in 1866, Sherwin-William manufactures, develops, distributes and sells coatings and related products to professional, industrial, commercial and retail customers. The company has over 3,000 retail locations in the United States.

Analysts believe PPG Industries Inc. is a “likely” and “logical” bidder for Comex, according to Bloomberg.

PPG officials have called Mexico “a tremendous growth market.”


Tagged categories: Acquisitions; Business matters; Business operations; Coatings manufacturers; Coatings Technology; Comex; Finance; Market share; Sherwin-Williams

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