Valspar to acquire 80% of Huarun Paints

26 June 2006 20:40  [Source: ICIS news]

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HOUSTON (ICIS news)--US-based Valspar on Monday said it will acquire an 80% share of Huarun Paints, one of China’s largest independent coatings companies.

The company will pay about $290m (€230.5m) for the shares, according to a filing with the US Securities and Exchange Commission. A spokesperson for Valspar, a coatings and paint company with headquarters in Minneapolis, Minnesota, did not return a call for comment.

Analysts with JPMorgan hailed the move as good strategy to expand Valspar's coatings business in China and to edge into the architectural paints market in this region. The equity research firm rated Valspar overweight.

In 2005, Huarun Paints had sales of about $180m. Valspar said the purchase is expected to close by the end of July and will dilute its earnings this year and next.

"We expect the transaction to be dilutive by  1 cent/share in fiscal 2006 and 2 cents/share in fiscal 2007 assuming a transaction multiple of two times sales, or $360m, and an EBIT [earnings before interest and taxes] of 10%, similar to Valspar's consolidated average EBIT margin," said Jeffrey Zekauskas, an analyst with JPMorgan.

JPMorgan said the company already has a presence in Asia, predominantly in the wood furniture area. JPMorgan estimated the company's sales in the Asia Pacific region to be in the range of $200m-250m.

Valspar also makes specialty polymers, colourants and gelcoats and it sells furniture protection plans.

The company’s shares were trading at $26.30 on Monday morning, up 9 cents from the previous close.

By: Joseph Lohan
+1 713 525 2653

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