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PPG, a global leader in paints, coatings and specialty materials, announced that it has reached a definitive agreement to sell 100% of its architectural coatings business in the U.S. and Canada at a transaction value of $550 million to American Industrial Partners (AIP), an industrials investor.
PPG’s architectural coatings business in the U.S. and Canada, which operates within the company’s Performance Coatings segment, is an industry leader in residential and commercial architectural coatings through its well-known portfolio of brands, including Glidden, Olympic, Liquid Nails, Homax, Pittsburgh Paints & Stains, Manor Hall, Flood, Dulux (in Canada), and Sico, among others. The business manufactures and sells interior and exterior paints, stains, caulks, repair products, adhesives, and sealants for homeowners and professionals. It also includes certain light-duty protective coatings products that are primarily sold through company-owned stores and manufactured through a common factory footprint.
The transaction, which is expected to close in late 2024 or early 2025, subject to customary closing conditions, is the result of PPG’s evaluation of strategic alternatives for the business, which was first announced on February 26, 2024. 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 company also announced 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 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. 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 represented approximately $2 billion of PPG’s 2023 total net sales, with low-single-digit EBITDA margin. Also, the company’s Performance Coatings segment operating (EBIT) income, excluding the U.S. and Canada architectural coatings EBIT and the associated growth-related investments we have made, would have resulted in an approximately 300-basis point improvement in segment margins in 2023.
PPG’s architectural coatings businesses in the other regions around the world, including in Latin America, Europe and Asia Pacific, where PPG holds strong #1 or #2 positions in a number of key countries, remain core businesses within the company’s portfolio.
The transaction includes the following Architectural Coatings facilities:
• Manufacturing: East Point and Oakwood, Ga.; Louisville, Ky.; Huron, Oh.; Reno, Nv.; Carrollton and Temple, Tx.; Delta, B.C.; and Vaughan, Ontario.
• Distribution centers: Huron, Oh.; Oakwood, Ga.; Reno, Nv.; Aurora, Il.; Flower Mound, Tx.; Riverside, Ca.; Reading, Pa.; Carolina, Puerto Rico; Calgary, Alberta; Delta, B.C.; Toronto, Ontario; and Moncton, New Brunswick.
• 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.
• Leased headquarter offices for leadership and administrative teams located in Cranberry, Pa.; Vaughan, Ontario; and Boucherville, Quebec.
American Industrial Partners (“AIP”) is an industrials investor, with approximately $16 billion in assets under management. AIP is distinctively focused on industrial businesses across a broad range of end markets that include: aerospace and defense, automotive, building products, capital goods, chemicals, industrial services, industrial technology, logistics, metals & mining, and transportation, among others. AIP looks to generate differentiated returns by investing in quality industrial businesses with strong management teams and working with those teams to implement comprehensive operating agendas to build long-term value. Current AIP portfolio companies generate aggregate annual revenues of approximately $25 billion and employ approximately 70,000 employees as of June 30, 2024.
