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Focusing on the Upside of Sherwin-Williams/Comex



While the regulators oppose the deal on the basis of potential unfair competition, Mexico’s paint manufacturers have embraced the deal for the boost it would provide for the industry’s global ambitions.



By Charles Thurston, Latin America Correspondent



Published December 11, 2013
Sherwin-Williams (S-W) executives have said they plan to head south to meet with the new members of Mexico’s anti-monopoly agency, Comisión Federal de Competencia Económica (CFCE), in an effort to come up with a winning solution for their twice-rejected initial proposal to acquire the Mexican operations of Comex Group. While the regulators oppose the deal on the basis of potential unfair competition, Mexico’s paint manufacturers have embraced the deal for the boost it would provide for the industry’s global ambitions.

In September, S-W, completed the purchase of the U.S. and Canadian businesses of Comex for $90 million in cash and assumed debt of some $75 million, out of a total offer of about $2.3 billion. Still, the Mexican manufacturing and distribution capabilities of Comex are the prize target.

Alejandra Palacios Prieto is the new head of the CFCE, following work at the federal telecommunications regulatory agency and as a director of governance projects at the Instituto Mexicano para la Competitividad (IMCO), an independent think tank on domestic and international competitiveness. Her new colleagues at CFCE are well-heeled academics and professionals with international credentials that include degrees from such institutions as Stanford, the University of Chicago, Texas A&M and the University of Warwick.

Palacios has said the CFCE is open to a modified deal. While S-W engages her and the rest of the new team, the Mexican paint manufacturers association has gone to bat for the merger. Javier Guillermo Maldonado Moctezuma, the president of the Asociacion Nacional de Fabricantes de Pinturas y Tintas (Anafapyt), has held several interviews supporting the deal, following the two CFCE decisions – the first made by the old members of the agency, followed by unanimous ratification of that decision by the new members. He said that while the merger would present no economic or labor problems for the industry, it should benefit many small- and medium-sized paint manufacturers in terms of technology acquisition.

The CFCE basis for ruling against the deal is that consumers might suffer from less choice and higher prices. But Maldonado has pointed out that although Comex is already the leading paint company in the country, over 300 other manufacturers in the country continue to do business, since there are varied paint quality levels offered and sought in the various segments of the market. Maldonado further points out that the industry suffers from high-cost raw material imbalances, which the S-W/Comex merger might alleviate in part.

Beyond the domestic competition issue, Maldonado was quoted saying “98 percent” of the Anafapyt membership sees the S-W/Comex deal as an opportunity for Mexico’s expansion in the global market. Comex is not only the largest paint distributer in Mexico, but also in Central America; the company has an international distribution chain that reaches as far as China.

Increased Mexican paint sales to the United States, to Europe and beyond have been a dream of the industry for years, following the formation of the North American Free Trade Agreement in 1994 and the Mexico-EU Free Trade Agreement in 1997. Given Mexico’s proven ability to compete with Chinese manufacturing, Sherwin-Williams’ investment could help rekindle growth of the Latin American paint market.


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