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Valspar Signs Deal with Ace

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The Valspar Corporation announced that it has entered into a long-term strategic supply agreement with Ace Hardware Corporation wherein it will manufacture and supply Ace branded paints as well as produce Valspar branded paints for 4000 Ace stores in the U.S. At the same time, Valspar also announced the acquisition of Ace Hardware’s paint manufacturing assets, including two manufacturing facilities located near Chicago.

With this strategic relationship, Ace expects to improve the quality and performance of the Ace-branded paint products and benefit from Valspar’s expertise in color, strong sales force and a competitively priced product assortment. Ace stated that the deal will facilitate more paint sales and the company will be able to expand its presence in the liquid paint market.

Introduction of Valspar paints in Ace stores is expected to begin in 2013. Ace will retain ownership of its existing paint brand trademarks, including Clark+Kensington and Ace Paint as Valspar will manufacture product lines exclusively for Ace.

In November 2012, Valspar released its fourth quarter fiscal 2012 results. The company’s adjusted earnings of 86 cents per share in the quarter ended October 26, 2012 beat the Zacks Consensus Estimate by a penny and exceeded the year-ago earnings of 84 cents. The results were aided by productivity gains and acquisition of new businesses.

Sales in the quarter went down 2.2% year over year to $1.02 billion, missing the Zacks Consensus Estimate of $1.08 billion. For fiscal 2012, sales increased 2% to $4.02 billion.

Valspar, which competes with Sherwin Williams Company (SHW - Free Report) and PPG Industries Inc. (PPG - Free Report) , currently retains a short-term Zacks #2 Rank (Buy). We have a long-term (more than 6 months) Neutral recommendation on the stock.

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