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

| Monday, June 30, 2014, 8:54 a.m.

PPG Industries Inc. is buying a leading paint company in Mexico as part of its global expansion strategy and is looking for other acquisitions.

“We are still interested and have the appetite for more,” CEO Charles E. Bunch said on Monday after Downtown-based PPG, the world's largest paint company, announced an agreement to acquire Consorcio Comex, S.A. de C.V., for $2.3 billion.

The deal would be PPG's second-largest acquisition after SigmaKalon Group, a Dutch paint producer it bought for $3.1 billion in 2008. It would use cash, short-term investments and maybe some debt to pay for Comex, Bunch said.

Shares of PPG surged, initially rising to $213.01 from Friday's close of $204.05. It closed at $210.15, up $6.10, or 3 percent.

Comex, headquartered in Mexico City, makes paint for home, business and industrial customers, and sells its products in Mexico and Central America through 3,600 independent stores.

PPG has said it plans to spend as much as $4 billion on acquisitions and share repurchases this year.

Last year, it purchased AkzoNobel NV's North American architectural coatings unit for $1.05 billion. That and smallers deals for Spraylat Corp. of Pelham, N.Y.; Dyrup AS in Denmark, and Deft Inc. in Irvine, Calif., moved PPG into the No. 1 spot.

This year, PPG acquired The Homax Group Inc., Masterwork Paint Co. in Pittsburgh and Hi-Temp Coatings Technology Co. Inc. in Boston.

During the past 15 years, Bunch said PPG has made 60 acquisitions in pursuit of its paint expansion strategy. It is interested in the Chinese market, he said.

With Comex, PPG will have an estimated 12 percent of market share worldwide, analyst Laurence Alexander of Jefferies LLC in New York said in a report.

Yet PPG lags behind Sherwin-Williams Co. in the United States, where its Cleveland-based rival has a 4-to-1 advantage in company-owned retail paint stores, analysts say. It has 4,100; PPG is renaming 600 company-owned stores under the PPG Paints brand, adding to 300. Both use networks of independent dealers. PPG's home and business unit has about $2 billion in sales, compared with about $8 billion at Sherwin-Williams.

In 2012, Sherwin-Williams bid $2.34 billion for Comex, but Mexican regulators blocked the deal, saying the combined company would have had a market share of as much as 58 percent, or up to 10 times that of the nearest competitor.

Bunch said PPG is confident regulators will approve its deal in four to six months.

Privately held Comex, founded in 1952, had 2013 sales of about $1 billion and about 3,900 employees. Its brands include Effex, Texturi and its namesake. Comex has eight manufacturing plants and six distribution centers.

“Comex is a high-quality, well-managed business with a long heritage of excellent customer service and leading, well-recognized regional brands,” Bunch said.

Ghansham Panjabi at Robert W. Baird & Co. in New York said PPG doesn't appear to be making acquisitions too quickly. “Some companies are better than others at doing it. The only thing we can base it on is their track record, and they have been very successful under Chuck Bunch.”

Panjabi said India and Brazil are other natural markets for PPG. He thinks more deals this year may occur in industrial markets.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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