Valspar sued by aggrieved shareholder protesting sale to Sherwin-Williams

A shareholder has sued Valspar Corp. in an attempt to thwart the paint company's $11.3 billion sale to behemoth Sherwin-Williams.

The plaintiff, Tom Mitsopoulos, is seeking class-action status and accused the directors of the Minneapolis-based maker of paints, stains and coatings of not properly disclosing financial projections and of breaching their fiduciary duty, according to documents filed with the Securities and Exchange Commission.

In the SEC documents, Minneapolis-based Valspar denied the allegations.

The lawsuit, filed last month in Delaware, accuses Valspar of failing to fully disclose its financial projections for the merger, which was announced March 20. The deal is worth about $11.3 billion, or $113 per share.

But some shareholders have complained because officials have said the per-share price could drop as low as $105 if the federal government requires certain divisions of the companies to be divested because of antitrust concerns.

Last month, Valspar and Sherwin-Williams issued the following joint statement: "Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar continue to believe that no or minimal divestitures should be required to complete the transaction."

The deal must be approved by shareholders and regulators and there are already indications of speed bumps.

In April, at least three law firms launched investigations into the deal and issued public inquiries looking for shareholders who felt aggrieved by the merger proposal. Late last month, Mitsopoulos filed his lawsuit seeking class-action status, more information and an order preventing the merger.

Also last month, the Federal Trade Commission requested its second round of information about the deal from both companies as part of the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Valspar called a special shareholders meeting for June 29 so they can vote on the merger deal.

This week, the company responded to Mitsopoulos' lawsuit, saying that Valspar had already disclosed all material information related to the company's sale to both shareholders and the SEC. The information was relayed when Valspar filed its proxy statement. Valspar "denies that any supplemental disclosure is necessary," company officials said.

If the acquisition by Sherwin-Williams is approved, the deal creating an entity with combined $15 billion in annual revenue would not close until next year.

Valspar shares closed Friday at $108.17, up 22 cents. Since the acquisition was announced in March, Valspar stock has shot from $83 a share to a 52-week-high of more than $108.

In the company's proxy statement filed May 25, Valspar disclosed how the merger deal came to be. In January 2016, Valspar CEO Gary Hendrickson called former Sherwin-Williams CEO Christopher M. Connor to ask if Sherwin-Williams was still interested in Valspar. The discussions that followed put Sherwin-Williams in the front-runner seat to acquire the company. Valspar's board had been in merger talks with another, unnamed company since early 2015. Now that deal was dead and Sherwin-Williams signed an agreement saying it was willing to pay up to $113 per share for Valspar.

Dee DePass • 612-673-7725