Global coatings company PPG has reached a definitive agreement to sell all of its architectural coatings business in the United States and Canada to industrial investor American Industrial Partners at a transaction value of $550 million. The announcement is a result of PPG’s evaluation of strategic alternatives for the business, first revealed in February this year.
In addition to the transaction, the company has also unveiled a comprehensive cost reduction program with anticipated annualized pre-tax savings of approximately $175 million once fully implemented, including savings of $60 million in 2025. The multi-year program is reportedly focused on reducing structural costs primarily in Europe and in certain other global businesses, along with other corporate costs following the two recently announced agreements to sell PPG’s silicas products business and the architectural coatings business in the U.S. and Canada.
According to PPG, the program includes various facility closures and other targeted fixed costs. The company will record a pre-tax charge of approximately $250 million in the fourth quarter 2024, and other charges over the next several years when certain costs are incurred. In total, PPG expects the cost reduction program to impact about 1,800 positions, primarily in Europe and the U.S.
“We are pleased to reach an agreement with American Industrial Partners and believe the business is well positioned to leverage its current positive momentum, leading brands, proven innovation, established customers, and dedicated and talented employees,” said Tim Knavish, PPG Chairman and Chief Executive Officer. “I want to thank the architectural coatings U.S. and Canada employees for their dedication and commitment throughout the years to deliver the quality products and services that meet our customers’ evolving needs.
“From a PPG perspective, this transaction, along with the pending sale of our silicas products business, demonstrates the active portfolio management by the company and our Board. These divestitures further optimize our portfolio by improving our organic growth and financial return profiles and will result in increased capability to channel our growth resources to areas where we have the strongest right to win with our customers.
“In addition, we are taking decisive self-help actions to reduce our overall cost structure. While these decisions are difficult, they are necessary to adjust our fixed cost base and to right-size our company following these two business divestitures. None of these actions will impact our ongoing investments or focus on organic growth.”
The architectural coatings business in the U.S. and Canada reportedly represented about $2 billion of total 2023 net sales, with low-single-digit EBITDA margin. On a three-year pro forma basis, PPG’s overall company sales volume results would have improved cumulatively by over 200 basis points excluding this business.
Additionally, the company’s Performance Coatings segment operating (EBIT) income, excluding the U.S. and Canada architectural coatings EBIT and the associated growth-related investments made, would have resulted in an approximately 300-basis point improvement in segment margins in 2023.
The transaction includes the following Architectural Coatings facilities:
-Manufacturing: East Point, Georgia; Oakwood, Georgia; Louisville, Kentucky; Huron, Ohio; Reno, Nevada; Carrollton, Texas; Temple, Texas; Delta, British Columbia (Canada); and Vaughan, Ontario (Canada);
-Distribution Centers: Huron, Ohio; Oakwood, Georgia; Reno, Nevada; Aurora, Illinois; Flower Mound, Texas; Riverside, California; Reading, Pennsylvania; Carolina, Puerto Rico; Calgary, Alberta (Canada); Delta, British Columbia (Canada); Toronto, Ontario (Canada); and Moncton, New Brunswick (Canada);
-More than 15,000 points of sale, including 750 company-owned stores, 6,600 independent dealer locations, and 8,100 major home improvement centers and retailer locations across the U.S., Canada and Puerto Rico; and
-Leased headquarter offices for leadership and administrative teams located in Cranberry, Pennsylvania; Vaughan, Ontario (Canada) and Boucherville, Quebec (Canada).
Net cash paid to PPG at closing will include customary adjustments for working capital and net debt. Goldman Sachs & Co. LLC acted as PPG’s exclusive financial advisor and Hogan Lovells U.S. LLP served as its legal advisor. The transaction is expected to close late this year or early 2025, subject to customary closing conditions.
