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RPM's Rust-Oleum Unit Acquires Gator Finishing Products

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RPM International Inc.’s (RPM - Free Report) Rust-Oleum business has acquired a leading manufacturer of sandpaper and other abrasives, Ali Industries, LLC (which is commercially known as Gator Finishing Products). However, financial terms of the transaction have been kept under wraps.

RPM’s Benefits From the Buyout

With annual net sales of approximately $75 million, Ali Industries offers finishing products for power sanding, hand sanding, cutting and grinding, as well as floor sanding. Its products are used on many surfaces including wood, metal and paint. These products are sold under brand names like Gator, Finish 1st and Zip Sander. Its abrasive products are manufactured in the United States and distributed across North America through home improvement centers, mass merchandisers, hardware, paint and automotive supply stores.

Ali Industries is an excellent fit for RPM’s Consumer Group segment as it enhances the unit’s surface preparation capabilities by adding abrasives to its lineup of patch, repair and cleaning products.

With this acquisition, Ali Industries is now a free-standing unit under RPM’s Rust-Oleum business. Notably, Rust-Oleum is the global leader in manufacturing innovative coatings that empower do-it-yourselfers and professionals. Hence, the Ali brothers, Terry, Chris and Philip will continue leading the business, as part of Rust-Oleum.

Strong Inorganic Drive: A Boon

Acquisitions have been an important part of RPM’s growth strategy. On Dec 18, 2019, RPM announced the Mantrose-Haeuser business unit’s acquisition of Elgin, IL-based manufacturer of dry stabilizer and emulsifier blends for the food industry — Profile Food Ingredients, LLC. The buyout created significant opportunities to leverage the combined sales forces of the entities, expand sales of specialty ingredients to the food industry and broaden RPM’s reach in international markets.

The company made three buyouts in fiscal 2020, five in fiscal 2019 and seven in fiscal 2018. Acquisitions added 1.1% to net sales in fiscal 2020 and 1.4% in fiscal 2019.

Meanwhile, RPM’s shares have underperformed the industry so far this year. Nonetheless, earnings estimates for fiscal 2021 have inched up 8.2% in the past 60 days. This depicts analysts’ optimism over the company’s prospects.

Zacks Rank & Other Key Picks

Currently, RPM carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the Zacks Construction sector include TopBuild Corp. (BLD - Free Report) , Aegion Corporation (AEGN - Free Report) and The Sherwin Williams Company (SHW - Free Report) . While TopBuild and Aegion currently sport a Zacks Rank #1 (Strong Buy), Sherwin Williams carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild’s earnings for 2020 are expected to increase 9.8%.

Aegion’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with the average surprise being 91%.

Sherwin Williams’ earnings for 2020 are expected to increase 8.6%.

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