Axalta to Buy Valspar’s North American Industrial Wood Coatings

On April 12, 2017, Axalta Coating System (AXTA) announced that it has signed a definitive agreement with Valspar (VAL) to acquire Valspar’s North American Industrial Wood Coatings business for $420.0 million in cash. The divestiture is expected to help get approval from the FTC (Federal Trade Commission and the CCB (Canadian Competition Bureau) for Sherwin-Williams’s (SHW) proposed acquisition of Valspar.

Valspar’s North American Industrial Wood Coatings business reported revenues of $225.0 million in 2016. Axalta’s chairman and CEO (chief executive officer) Charlie Shaver said, “This is an outstanding opportunity for Axalta to enter the large Industrial Wood Coatings market with an industry-leading portfolio of products and customers.”

On April 13, 2017, Axalta closed at $31, falling 0.90% for the week. The iShares US Basic Materials (IYM), which holds 1.2% in AXTA as of April 14, 2017, underperformed AXTA with a return of -2.8% for the week and closed at $86.88. The fall in AXTA stock could largely be due to the prevailing geopolitical tension between the United States and North Korea.

AXTA’s peers Sherwin-Williams (SHW), PPG Industries (PPG), and RPM International (RPM) fell 1.5%, 1.5%, and 4.5%, respectively. However, despite a fall in AXTA stock, AXTA traded 7.0% above its 100-day moving average of $28.97, indicating an upward trend.

Analysts expect AXTA’s 12-month target price to be $33.13, implying a potential return of 6.9% over the closing price on April 13, 2017. Year-to-date, the stock has returned 14.0%. AXTA’s 52-week low is $24.27, and its 52-week high is $33.06.

The 14-day RSI (relative strength index) of 47 indicates that the stock is neither overbought nor oversold. An RSI of 70 and above indicates that a stock is overbought, while an RSI of 30 and below indicates that a stock is oversold.