PPG announced Thursday morning that it has reached a deal to sell its architectural paints business in the U.S. and Canada in a transaction valued at $550 million.
Headquartered in Cranberry, with more than 6,000 employees and 750 company-owned stores, the paints division is likely the most recognizable output for the average retail customer, who is used to seeing brands like Glidden on the shelves of hardware stores.
It is being sold to American Industrial Partners, a New York-based private equity investment firm. PPG’s U.S. and Canadian paints business will be among the biggest in American Industrial’s portfolio, which includes dozens of companies in industrial, logistics, chemicals and other businesses.
The transaction, subject to regulatory approvals, is expected to close late this year or in early 2025, company leaders said. On a call with investors, PPG said it will net about $450 million in cash to the company.
The Downtown-based firm also announced a cost-cutting program that company leaders referred to as a “self-help” initiative. The program will result in the elimination of 1,800 positions at the company in the U.S. and Europe. These are unrelated to the North American decorative paints business that will be sold.
According to PPG’s website, it currently has about 50,000 employees worldwide, including some 18,000 in the U.S. and Canada, 17,000 in Europe, the Middle East and Africa, and the rest divided between Asia and Latin America.
PPG’s goal is to eliminate $175 million a year from its costs, which will involve closing some facilities. It’s not yet clear which of PPG’s businesses will bear the brunt of the cuts, but company leaders indicated that weak demand from automakers, especially in Europe, will guide some of those decisions.
The pending sale of the paints business to American Industrial Partners caps a monthslong strategic review process at PPG that also included the sale of its silicas business earlier this year.
“We literally had over 100 interested parties to begin with … and got 30 initial bids, and so we had a very, very broad group of interest,” Tim Knavish, PPG chairman and chief executive officer, said during a call with investors Thursday morning.
The transaction includes manufacturing facilities in Georgia, Kentucky, Ohio, Nevada, Texas, British Columbia and Ontario; distribution centers across the two countries, including one in Reading, Pa.; and assets at more than 15,000 sales locations, including 750 PPG-owned stores, 6,600 independent dealer locations, and 8,100 major home improvement centers and retailer stores.
The headquarters for the business will remain in Cranberry.
While many of the companies American Industrial has bought have been sold within five years, some have been held for a decade.
The deal does not include PPG’s architectural paints businesses in Europe, Asia, Mexico or Latin America. It will also have no impact on the naming rights deal that PPG secured with the Penguins in October 2016 for PPG Paints Arena.
“PPG continues to see value in PPG Paints Arena naming rights for our brand and business,” company spokesman Mark Silvey said on Thursday. “Since the Penguins and the NHL overall have players from around the world, we get a high level of interest from paint customers and employees to come to PPG Paints Arena.”
Freeing itself from the North American paints business will help the company refocus on its high-growth areas like aerospace and infrastructure, while it waits for automotive and industrial to rebound, company officials said.
Even with one customer impacted by a strike, Mr. Knavish said likely in reference to Boeing, the aerospace business is seeing no slowdown “and military is just red hot,” he said. PPG will be adding capacity to keep up with demand in that sphere, he said.
The company reported its third quarter earnings on Wednesday evening. Net income for the quarter was $468 million, or $2 per diluted share, compared with $426 million, or $1.79 per share, during the three months ended Sept. 30, 2023.
___
(c) 2024 the Pittsburgh Post-Gazette
Distributed by Tribune Content Agency, LLC.
