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Letter to the Editor
This article originally appeared in the October, 1999 Issue of INSIGHT
October 1999 Investment Update
Rumors abound that BASF, Sherwin Williams, and Akzo Nobel executives have all been seen talking to executives of each of the other companies. Is an acquisition or merger in the wings? And will we see one less refinish materials supplier as we enter into the next millennium?
The answer is a strong “maybe,” but it’s anybody’s guess at this point just how it may unfold. Akzo and BASF would have a hard time combining based on antitrust concerns here in Europe, but other combinations may yet prove fruitful. Yet another “player” in the wings is potentially Valspar which has a strong interest in expanding their market position and has a strong enough balance sheet to perhaps make it happen.
Historically, Sherwin Williams has shown little interest in any part of the European coatings market, preferring to make its international expansion investments in South and Central America. It would be quite a shift if Sherwin-Williams were to enter the European market and expand into being an OE supplier through a major acquisition. On this basis I tend to discount rumors of Sherwin-Williams acquiring either BASF’s automotive paint business or that of Akzo Nobel.
On the other hand, both BASF and Akzo, which have significant positions in Europe and the U.S. would undoubtedly love to get their hands on Sherwin Williams company owned distribution, 125+ branches, plus jobbers and the Martin Senour NAPA relationships. This, coupled with Sherwin-Williams’ efficient manufacturing and warehouse distribution facilities, would provide the level of marketshare that many feel will be critical in the future to compete globally with the DuPont/Herberts and PPG/ICI combinations.
On the stock side, it was a rotten month if you were long on most of our industry and industry-related stocks.
First Priority slid under $1 after a press release announcing a new major customer (unidentified). Keystone continues to suffer from the State Farm litigation hanging over the aftermarket parts industry and Progressive Insurance stock dropped like a rock on the announcement of less-that-expected earnings.
On the brighter side, The Boyd Group of Canada had a nice increase as did FinishMaster, reaching its high for the year.
CCC’s stock continues to languish at the $10 level as it expands its efforts here in the UK and Europe both through new Internet product developments and with the acquisition of one of the UK’s largest independent adjustor organizations. CCC now has the capability of providing full claim handling services to its UK insurance customers.
Just how the shops will feel about CCC’s providing both the estimating system and the insurance appraisal is yet to be seen. I suspect that in the U.S. independents, dealers, and consolidators would have something of a problem with this concept if CCC were to introduce it on a scale beyond what they offer today to smaller insurers and fleets in the claims settlement area.
What CCC is endeavoring to accomplish by providing estimating capabilities to the European market via the internet makes a tremendous amount of sense and I would suspect that it won’t be too long before transaction based and costed services will be made available in the U.S.
-Charles Baker-
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