Combined forces: with their merger completed, Rodda Paint and Cloverdale look for greater regional strength.

Cloverdale Paint and Rodda Paint have completed a merger that will yield a $150 million per year, family-controlled powerhouse in northwestern North America, producing close to 10 million gallons annually.

The merger is the third in four years for Surrey, B.C.-based Cloverdale, which acquired Northern Paint and Fargo prior to its recent union with Portland-based Rodda.

"Short term, our goal is to bring the new wholly-owned U.S. subsidiary--which will be called Rodda Paint Corp.--to a profitable level. That goal is now on track for 2004," said Wink Vogel, CEO of Cloverdale.

Over the past decade, Cloverdale, which has 65 branches, opened a chain of seven stores in Washington state along the Interstate 5 corridor, but has had trouble reaching the critical mass for profitability. Now, several stores there will be merged with some of the 41 Rodda stores, under the Rodda banner, Vogel said. The vacated stores may then become specialty industrial product locations, he added.

Over time, production rationalization also will take place, since the Rodda production plant in Portland is under-utilized, and since Cloverdale has four plants in Canada that have yet to undergo full rationalization following prior mergers, Vogel indicated.

Both Rodda and Cloverdale brands will be maintained where there is a strong market position, and where there is overlap, one of the two eventually will be phased out on a product-by-product basis.

"We're not in a hurry," Vogel said. For example, Rodda's zero-VOC Horizon architectural line will now be sold in Canada, and Cloverdale will cease to develop its own zero-VOC line. Similarly, Cloverdale's new 100% epoxy floor coating--now in field tests--will be sold in the U.S. Rodda stores.

Among other synergies that the merger will bring are elements of generally lower overhead costs, including more optimized purchasing, and stronger research and development. Cloverdale brings its R&D staff of 20 to the merger, along with substantial technology in the industrial segment.

Cloverdale traditionally has sold as far east in Canada as western Ontario, and Rodda traditionally sold the bulk of its products in Alaska, Washington and Oregon, with smaller sales in Idaho and Northern California. The merged company will seek to maximize its presence in these markets before expanding farther geographically in North America, Vogel said.

Export sales, particularly to China, where Cloverdale has a sales staffer, will continue to grow, nonetheless. "We've painted equipment that's gone all over the world, and done some paint shipments to places like Kazakhstan, Japan and Russia, but on a sporadic, project-specific basis," Vogel said.

Tom Braden, CEO of Rodda Paint Co., will now serve as the chairman of Rodda Paint Corp., and Al Mordy, long-time president of Cloverdale, will serve as the CEO of the subsidiary. Three generations of the Vogel family are involved in the management of the company as well.

As part of the merger agreement, Cloverdale purchased 39% of the company from shareholders who did not take an active role in management. No outside debt was issued for the merger beyond pre-existing bank lines, Vogel noted.

Last year, Rodda reported approximately $65 million in sales, and Cloverdale reported approximately $87 million. Rodda's work force included some 350, while Cloverdale's was 650. About 55% of all Cloverdale sales have been in the architectural segment, and about 45% in the industrial segment. Due to the competition from big box stores in the architectural lines, Cloverdale's industrial segment is growing much faster now.

Charles Thurston is Coatings World's Latin American correspondent.