Sherwin-Williams Deal For Comex Must Change
Sherwin-Williams
or Comex could
sell off some
assets to make
the deal more
palatable to
the Mexican
anti-monopoly
agency, which is
concerned about
the viability of its
paint industry.
by Charles W. Thurston
Latin America Correspondent
thurstoncw@rodmanmedia.com
Blocked in its initial attempt to acquire Mexico’s leading paint producer Comex for $2.3 billion, Sherwin-Williams is
“aggressively” pursuing alternative routes to
the purchase, CEO Christopher M. Connor
has vowed. The Mexican anti-monopoly
agency, Comisión Federal de Competencia
(CFC), finally ruled on July 18 in a three-to-two vote split against the acquisition announced November 12. Meanwhile, the CFC
is headed into vacations and possible membership restructuring.
The CFC decision was based on the arguments that the deal would leave S-W with a
majority control – about 60 percent – of the
Mexican paint and coatings industry, and
that it would be six to 10 times larger than its
closest competition. The CFC has not made
its 144-page decision public yet. S-W has 30
working days to respond to the CFC position,
following the delivery of some 20,000 pages
of documents to the commission supporting
the initial deal.
S-W or Comex could sell off some assets to
make the deal more palatable to the CFC, which
is concerned about the viability of its paint industry, including some 375 manufacturers and
some 15,000 direct points of sale across the
country, according to the national trade group
Asociacion Nacional de Fabricantes de Pinturas
y Tintas (Anafapyt). In contrast, Comex’ network of 3,200 points of sale are operated by
some 875 concessionaires.
In an earlier U.S.-Mexican merger proposal, a sell-off was necessary. Beer brewers
ABI and Grupo Modelo spun off some assets
to Constellation Brands to make the $20 billion
deal palatable to the U.S. Justice Department
earlier this year.
Comex CEO Marcos Achar, reacting to the
CFC decision, said that a negative decision
by the CFC would affect $1 billion worth of
investments his company has already made.
He clarified that his company’s national paint
and coatings market share amounts to only
40 percent with all segments combined. The
company’s architectural segment share is
approximatley 53 percent, wood finishes is
about 30 percent, waterproofing is about 30
percent, and industrial and marine is about
18 percent, Achar noted in local interviews
following the CFC decision. S-W only holds
about six percent of the Mexican architectural segment, which seems to be the focus of
the CFC’s resistance.
Comex produces paints and coatings in
16 North American locations, including
eight in Mexico, five in the United States
and three in Canada, through its acquisition
of PPI several years ago. Out of the company’s $935 million revenues, 65 percent came
from architectural segment sales, 25 percent
from industrial sales and the remainder from
all other segments. Comex enjoys something
of a sweetheart relationship with Mexico’s
national oil company Pemex, for which it
has helped develop paint and coatings quality standards that are utilized at times as a
de facto national standard.
Comex also exports to the Caribbean, where
it has been building a network of more than
90 stores. Among countries in its network there
are: Belize; Costa Rica; El Salvador; Guatemala;
Honduras; Nicaragua and Panama.
Achar also complained that the CFC,
which will go into a two-week vacation period, could change its member composition
upon return, and that changes to the national anti-monopoly law also are pending that
could affect the case. The current head of
the CFC is Eduardo Pérez Motta, a staunch
pro-competition diplomat who has served as
Mexico’s representative to the World Trade
Organization and who led the European
Union-Mexico free trade agreement negotiations. Pérez earned a Masters in economics at
the University of California at Los Angeles,
and carried out doctorate studies there. CW
