Monday, March 21, 2016
Does the Proposed Paint Merger Create Value?
Sherwin-Williams announced that it intends to acquire rival Valspar in a $9.3 dollar deal. What do the markets think of the deal? The stock market price of the target, Valspar, increased by 19.44 points (23.19%) on the news.
But because Sherwin-Williams has more shares outstanding, comparisons made from these amounts are not quite right. Multiplying price changes by the number of shares yields an increase in value of $1.538 billion for Valspar and a decrease of $1.345 billion for Sherwin-Williams. On net, shareholder value rose. The markets think assets would be moved to higher valued uses.