U.S.-based Sherwin-Williams's acquisition of Mexican paint company Consorcio Comex, S.A. de C.V. will not be allowed because it "would impose market conditions that no competitor could counter," the Federal Competition Commission, or CFC, said Thursday.
The "merger would imply an accumulated market share on the order of 48 (percent) to 58 percent, depending on the type of decorative paint, making it between six and 10 times bigger than the closest competitor," the CFC said in a statement.
"As a result, it would consolidate or increase the market share of the merged company, so that it would be easier to set prices artificially high, as well as to engage in anti-competitive practices that would harm consumers," the CFC said.
Cleveland, Ohio-based Sherwin-Williams said last November it was buying Comex for $2.34 billion.
"We are disappointed by this decision, but remain hopeful that we can adequately address the Commission's objections and proceed with the transaction," Sherwin-Williams chairman and CEO Christopher M. Connor said in a statement.
Comex, which was founded in 1952, is Mexico's largest paint manufacturer.
"The company is reviewing the rationale for the commission's decision and expects to respond to the commission's concerns in the near future," Sherwin-Williams said.
The company has 3,300 paint stores across Mexico operated by 750 franchisees, who sell paint for construction and industrial uses.
Comex, which employs 7,200 people, has 240 stores in the United States and Canada.
The Sherwin-Williams Company, which was founded in 1866, hoped to use the acquisition of Comex to expand its presence in Latin America. EFE