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Sherwin-Williams (SHW) Inks Deal With Hempel to Divest Wattyl

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The Sherwin-Williams Company (SHW - Free Report) recently announced that it has entered into a purchase agreement with Hempel A/S to divest the Wattyl business. Wattyl, based in Australia and New Zealand, is a producer and seller of architectural and protective paint as well as coatings. It generates annual revenues of roughly $200 million and has 750 people in employment.

The deal is expected to be wrapped up in the first quarter of 2021, subject to customary closing conditions.

Wattyl became a part of Sherwin-Williams through The Valspar Corporation acquisition in 2017. It was previously reported in Sherwin-Williams Consumer Brands Group.

Deloitte Corporate Finance Australia played the role of M&A adviser to Sherwin-Williams and Wattyl on the transaction.

The divestment of Wattyl is in sync with the company’s ongoing process to evaluate all aspects of its portfolio for their long-term strategic fit and ability to meet performance criteria. Although significant improvement had been brought in the Wattyl business, the company’s resources could be utilized better for higher growth opportunities, greater returns and cash flow and more meaningful scale, Sherwin-Williams noted.

Shares of Sherwin-Williams have gained 23.8% in the past year compared with 24.1% rise of the industry.

Sherwin-Williams, last month, stated that it expects demand for North American new residential and residential repaint to remain strong. The commercial end market is expected to stay choppy, while the DIY business is likely to face challenging comparisons. The industrial business is expected to be in the best position and industrial demand is forecast to improve, moving ahead.

The company expects consolidated net sales for the first quarter of 2021 to increase high single digits compared with prior-year quarter’s levels. For 2021, it is expected to increase mid-to-high single digits. The company also expects adjusted earnings per share for 2021 to be between $26.40 and $27.20 compared with $24.58 per share in 2020.

 

Zacks Rank & Other Key Picks

Sherwin-Williams currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Fortescue Metals Group Limited (FSUGY - Free Report) , BHP Group (BHP - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) .

Fortescue has a projected earnings growth rate of 84.3% for the current fiscal. The company’s shares have surged around 177.4% in a year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BHP has an expected earnings growth rate of 65.6% for the current fiscal. The company’s shares have gained around 72.3% in the past year. It currently carries a Zacks Rank #2.

Impala has an expected earnings growth rate of 195.9% for the current fiscal. The company’s shares have rallied around 76.1% in the past year. It currently sports a Zacks Rank #1.

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