PPG Announces Agreement to Sell its U.S. and Canada Architectural Coatings Business to American Industrial Partners and Unveils a Comprehensive Cost Reduction Program.

PPG, a global leader in paints, coatings, and specialty materials, has entered into a definitive agreement to sell its entire architectural coatings business in the U.S. and Canada to American Industrial Partners (AIP) for $550 million.

The transaction, subject to customary closing conditions, is expected to be completed by late 2024 or early 2025. PPG will receive net cash at closing, with adjustments for working capital and net debt. Goldman Sachs & Co. LLC served as PPG’s financial advisor, while Hogan Lovells U.S. LLP acted as legal advisor.

PPG also unveiled a comprehensive cost reduction program, targeting annualized pre-tax savings of approximately $175 million once fully implemented, with $60 million projected for 2025. The multi-year plan focuses on cutting structural costs, primarily in Europe and other global businesses, following the sale of its silicas products and architectural coatings businesses. The program will involve facility closures and reductions in fixed costs, with a pre-tax charge of about $250 million to be recorded in the fourth quarter of 2024. In total, the initiative is expected to impact around 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.”

PPG announced that its U.S. and Canada architectural coatings business, which accounted for approximately $2 billion of PPG’s total net sales in 2023, had a low-single-digit EBITDA margin. On a pro forma basis over three years, excluding this business, PPG’s overall sales volume would have improved by over 200 basis points. Additionally, the Performance Coatings segment’s operating income (EBIT), excluding the U.S. and Canada architectural coatings business and related growth investments, would have seen an approximate 300-basis point margin improvement in 2023.

PPG emphasized that its architectural coatings businesses in other regions, such as Latin America, Europe, and Asia Pacific, remain key to its portfolio, holding strong positions in several major markets.

About PPG's U.S. and Canada Architectural Coatings Business:

Part of PPG’s Performance Coatings segment, the architectural coatings business in the U.S. and Canada is a leader in residential and commercial coatings. It includes well-known brands like GLIDDEN®, OLYMPIC®, LIQUID NAILS®, HOMAX®, PITTSBURGH PAINTS & STAINS®, Manor Hall®, FLOOD®, DULUX® (in Canada), and SICO®. The business produces and sells a variety of interior and exterior paints, stains, caulks, adhesives, sealants, and repair products to homeowners and professionals. It also manufactures light-duty protective coatings, primarily distributed through company-owned stores and made within a shared factory network.

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.

• Leased headquarter offices for leadership and administrative teams located in Cranberry, Pennsylvania; Vaughan, Ontario (Canada) and Boucherville, Quebec (Canada)

About American Industrial Partners:

American Industrial Partners (AIP) is an investor specializing in industrial businesses, managing approximately $16 billion in assets. AIP focuses on a wide array of industrial sectors, including aerospace and defense, automotive, building products, capital goods, chemicals, industrial services, industrial technology, logistics, metals and mining, and transportation.

AIP aims to generate superior returns by investing in high-quality industrial companies with strong leadership teams. It collaborates closely with these teams to implement comprehensive operational strategies, driving long-term value creation. As of June 30, 2024, AIP’s portfolio companies collectively generate around $25 billion in annual revenue and employ approximately 70,000 people.

Source: PPG