Global coatings manufacturer PPG revealed on Feb. 26 that it has started the process to review strategic alternatives for its architectural coatings business in the United States and Canada. Goldman Sachs & Co. LLC has been engaged as the financial advisor.
According to the company’s release, the business operates within its Performance Coatings segment. Residential and commercial architectural coatings brands include Glidden, Olympic, Liquid Nails, Homax, Pittsburgh Paints & Stains, Manor Hall, Flood, Dulux and Sico, among others.
The business manufactures and sells interior and exterior paints, stains, caulks, repair products, adhesives and sealants. It also reportedly includes certain light-duty protective coatings products that are primarily sold through company-owned stores and manufactured through a common factory footprint.
In total, PPG says, the distribution network includes more than 15,000 touchpoints through company-owned stores, independent dealer locations, and home improvement centers and retailers across the U.S. and Canada.
In 2023, the architectural coatings business in the U.S. and Canada reportedly represented approximately 10% of PPG’s total net sales.
“The architectural coatings business in the U.S. and Canada has a well-established position in a growing market, leading brands, proven innovation, established customers, and dedicated and talented employees. We have made considerable progress over the past several years in modernizing the architectural coatings business model to better position the business for continued success,” said PPG Chairman and Chief Executive Officer, Tim Knavish.
“This has included instituting value-added customer-facing digital tools, revamping our manufacturing and distribution footprint, transitioning towards an asset-light distribution model, and introducing innovative products that enhance customer productivity and sustainability. Our actions over the past several years have created positive momentum in the business as we have significantly increased the number of distribution points for our well-known brands. These changes have been recognized in the industry and validate the progress of the business’ transformed strategy. The business is now poised to accelerate this transformation.”
Despite the business delivering flat sales volumes in 2023, PPG notes, on a 3-year pro forma basis the company’s overall sales volume results would have improved cumulatively by over 200 basis points excluding the architectural coatings U.S. and Canada business.
Additionally, the Performance Coatings segment operating (EBIT) income, excluding the U.S. and Canada architectural coatings EBIT and the associated growth-related investments, would have resulted in an approximately 300-basis point improvement in segment margins in 2023.
PPG explains that the timing and outcome of the strategic review is “uncertain,” and that there is no assurance that the review will result in any transaction or other outcome. The company adds it does not intend to disclose developments or provide updates on the progress or status of the review unless and until it deems further disclosure is appropriate or required.
The strategic review of the architectural coatings business in the U.S. and Canada does not include its architectural coatings businesses in the other regions around the world, including in Latin America, Europe and Asia Pacific.
The architectural coatings business in the U.S. and Canada is reportedly led by about 6,600 employees in both manufacturing and distribution. Approximately 750 company owned stores in the U.S. (including Puerto Rico) and Canada are located within the business, with a headquarters in Cranberry, Pennsylvania.
“We are exploring this strategic review now given the positive momentum in the business, with the intent of ensuring its continued growth and success while also maximizing the value for PPG and its shareholders. We will assess whether some or all of the business could be better suited to grow faster with a partner or different owner, or may be better suited to operate as a core business within another company, as a standalone entity, or in a joint venture,” continued Knavish.
“Our review will help to determine if any of these alternative structures will provide the business with more speed and accelerated growth capability. Throughout this process, we will continue to fully support the business, our employees, and our architectural coatings customers throughout the U.S. and Canada.”
