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Review of PPG-Comex Deal Extended

Monday, October 20, 2014

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PPG Industries will wait a bit longer for Mexico's decision on the company's $2.3 billion bid to take over that country's largest paint and coatings maker.

Mexican antitrust regulators have told PPG that they want more time to review the company's proposed acquision of Consorcio Comex, S.A. de C.V. (The Comex Group).

The deal, announced June 30, would catapult PPG into a major player in the booming Latin American coatings market. Comex also says it favors the deal.

Comex Group

Mexico's largest paint and coatings supplier, Comex has operations throughout Latin America.

PPG's share prices shot to a new high on news of the deal.

More Review

News of Mexico's additional review came last week, just days before the commission would have been required to rule on the regulatory filing.

PPG announced that it had received notice from Mexico’s Federal Economic Competition Commission of an extension in the review timeline for the transaction.

PPG said it had expected the extension, "given the magnitude of the transaction." The Pittsburgh, PA-coating maker expects approval of the deal and closure in its fourth quarter.

Déjà Vu?

Still, approval of the deal is no sure thing. Cleveland-based Sherwin-Williams also pursued a $2.34 million offer for Comex over 18 months.

The competition commission allowed Sherwin-Williams to purchase Comex's U.S. and Canadian portfolio for $165 million. But the commission twice rejected the lion's share of the deal—the Latin American business— expressing concern about a potential monopoly.

Comex Group
Comex Group

PPG is the second U.S. paint company to make a play to acquire Comex, a leading paint company south of the border. Regulators refused to approve a deal proposed by Sherwin-Williams, causing the company to end its bid.

Regulators 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.

Finally, the Cleveland-based company withdrew its offer in April, leaving an opportunity that PPG quickly seized. (Sellers on behalf of Comex have since filed suit against Sherwin-Williams over the failed deal.)

What's at Stake

Comex would be a major prize for its new owner.

The Mexico City-based supplier is a billion-dollar manufacturer of industrial, protective, specialty and architectural coatings throughout Latin America.

The largest paint and coatings company in Mexico, Comex has approximately 3,600 stores that are independently owned and operated by more than 700 concessionaires.

Comex presentation
PPG Industries Inc.

PPG said it anticipated an extension by the competition commission, given the magnitude of the transaction. Comex reported sales of approximately $1 billion in 2013.

Founded in 1952, the privately held business operates eight manufacturing sites in Mexico, five in the U.S., and three in Canada, and has about 3,900 employees.

Plan in Motion

The acquisition, if approved, would boost PPG’s architectural coatings business in a region where the company has a “negligible” reach, PPG has said.

“We are excited to participate in the growing Mexican economy and look forward to working with the Comex team as we integrate the business into PPG,” chairman and CEO Charles E. Bunch said when the deal was announced.

Commercial Contractor
PPG Industries Inc.

The acquisition would boost PPG’s architectural coatings business in a region where the company has a “negligible” reach, according to Charles E. Bunch, PPG chairman and CEO.

Comex CEO Marcos Archar Levy said, “Being part of PPG gives us new opportunities and synergies that will allow us to continue to significantly grow in our markets."

At that time, the companies indicated that the regulatory review would take four to six months.

PPG maintains this projection, the company confirmed Thursday (Oct. 16) in releasing its third-quarter results.


Tagged categories: Acquisitions; Architectural coatings; Business matters; Business operations; Coatings manufacturers; Comex; Marine Coatings; Market share; PPG

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