PPG to sell U.S. and Canada architectural coatings business, announces cost reduction program
PPG, a global provider 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 USD 550 million to American Industrial Partners (AIP), an industrials investor.
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 acted as PPG’s exclusive financial advisor and Hogan Lovells served as its legal advisor.
PPG announces comprehensive cost-cutting programme
The company today also announced a comprehensive cost reduction program with anticipated annualized pre-tax savings of approximately USD 175 million once fully implemented, including savings of USD 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 USD 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,” 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.”
Impact on PPG’s financial performance and market positions
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. As previously stated, on a 3-year pro forma basis PPG’s overall company sales volume results would have improved cumulatively by over 200 basis points excluding this business. 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 global focus remains in place
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:
About American Industrial Partners
American Industrial Partners (AIP) is an industrials investor, with approximately USD 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 USD 25 billion and employ approximately 70,000 employees as of June 30, 2024.
