PPG Industries, Inc. (NYSE:PPG), a global supplier of protective and decorative coatings signed a definitive agreement to acquire Consorcio Comex, S.A. de C.V. (Comex), an architectural and industrial coatings company in Mexico for $2.3 billion.
PPG Industries purchased Comex to boost its presence in the architectural coatings market in Mexico and Central America. Comex manufactures coatings and related products. Its sells its products to 3,600 stores independently owned and operated by more than 700 concessionaires in the region. It has 3,900 employees, eight manufacturing plants and six distribution centers. In 2013, its revenue was $1 billion.
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Comex business complements PPG Industries
According to Charles E. Bunch, chairman and CEO of PPG Industries, the acquisition of Comex is “very complementary” to the business of PPG Industries. He said, “Comex is a high-quality, well-managed business with a long heritage of excellent customer service and leading, well-recognized regional brands.”
Bunch emphasized that Comex is a leader in the architectural coatings market in Mexico and Central America where PPG Industries has a negligible presence. He added, “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.”
Consistent with PPG Industries’ expansion strategy
Furthermore, Bunch pointed out that the acquisition of Comex is consistent with the strategy of PPG Industries, Inc. (NYSE:PPG) to expands its coatings business portfolio globally. He expressed assurance that the company will continue to have a strong cash balance, expanded free cash flow, and a high degree of financial flexibility after the deal.
Industrial Industries, Inc. (NYSE:PPG) also expected additional, disciplined cash deployment focused on value creation for its shareholders.
On the other hand, Marcos Achar Levy, CEO of Comex, said, “In these times of globalization and highly competitive markets, strategic alliances allow the development of companies and its individuals. Being part of PPG gives us new opportunities and synergies that will allow us to continue to grow significantly in our markets.”
Funding for the acquisition
PPG Industries, Inc. (NYSE:PPG) plans to fund that acquisitions using its existing cash and short-term investments. The company also indicated its intention to fund a portion of the deal through additional debt.
According to Bunch, the transaction is expected to be immediately accretive to earnings excluding non-recurring acquisition-related costs. PPG Industries, Inc. (NYSE:PPG) also estimated acquisition-related synergies of around 3% to 4% of acquired sales within two years.