Valspar Corp. Acquires Lilly Industries in $975 Million Deal

Strategic Insights -

Valspar Corp.'s $975 million acquisition of Lilly Industries marks the Minneapolis-based company's 16th purchase in five years, expanding its industrial coatings product line and international reach. The deal is expected to save costs through raw material purchasing and reduce competition in the paint and coatings industry. Valspar's acquisition of Lilly will increase its sales to about $2.3 billion by the end of 2001, making it the No. 6 position in the industry from No. 8. Analysts say the two companies are a good fit, but consolidation and staff integration are likely to occur. The purchase will also provide Valspar with $762 million in cash and assumed debt of $213 million.

Key Takeaways:

  • Valspar Corp. has acquired Lilly Industries for $975 million in cash and assumed debt, marking its 16th acquisition in five years.
  • The deal expands Valspar's industrial coatings product line and international reach, expected to save costs through raw material purchasing.
  • The acquisition will increase Valspar's sales to about $2.3 billion by the end of 2001, making it the No. 6 position in the industry from No. 8.
  • Valspar expects Lilly to add to profits in the second year, with the company's goal of $50 million to $60 million in profits from the merger over three years.
  • Timothy Gerdeman, an analyst for Lehman Brothers, said the acquisition is impressive, given Valspar's growth from a "sleepy little Minneapolis company 20 years ago."
  • Paul Reyelts, Valspar's chief financial officer, said that the company has too many plants and needs to do more analysis before making any conclusions on consolidation.
  • The purchase is expected to provide Valspar with $762 million in cash and assumed debt of $213 million.

Statistics:

  • 16th acquisition of Valspar Corp. in five years
  • $975 million acquisition price
  • $762 million in cash
  • $213 million in assumed debt
  • 20 percent of Valspar's sales are international, while 27 percent of Lilly's sales are international
  • 39 manufacturing plants worldwide for Valspar, 26 plants for Lilly
  • 4,600 employees for Valspar, 2,500 employees for Lilly
  • $1.4 billion sales for Valspar in the year ended October 31
  • $656 million sales for Lilly in 1999

Sources:

  • "Valspar Corp. acquires Lilly Industries in $975 million deal" - Saint Paul Pioneer Press, 2000
  • "Lehman Brothers" - Timothy Gerdeman, analyst
  • "U.S. Bancorp Piper Jaffray" - Stephen Jacobs, analyst
  • "Lilly Industries" - Lilly Industries Inc. of Indianapolis
  • "Valspar Corp." - Valspar Corp. of Minneapolis
  • "Knight Ridder/Tribune Information Services" - Distributed by Knight Ridder/Tribune Information Services