PPG reaches agreement to sell architectural coatings U.S. and Canada business to American Industrial Partners; announces comprehensive cost reduction program

Rhea-AI Summary

PPG has announced a definitive agreement to sell its architectural coatings business in the U.S. and Canada to American Industrial Partners (AIP) for $550 million. The transaction is expected to close in late 2024 or early 2025. Additionally, PPG revealed a comprehensive cost reduction program aimed at achieving annualized pre-tax savings of $175 million, including $60 million in 2025.

The program focuses on reducing structural costs primarily in Europe and other global businesses, along with corporate costs following recent business divestitures. It will impact about 1,800 positions, mainly in Europe and the U.S. PPG will record a pre-tax charge of $250 million in Q4 2024, with additional charges expected over the next few years.

The U.S. and Canada architectural coatings business represented approximately $2 billion of PPG's 2023 total net sales, with low-single-digit EBITDA margin. PPG's architectural coatings businesses in other regions remain core to the company's portfolio.

Positive

• Sale of U.S. and Canada architectural coatings business for $550 million
• Cost reduction program expected to yield $175 million in annualized pre-tax savings
• Improvement in overall company sales volume by over 200 basis points on a 3-year pro forma basis
• Approximately 300-basis point improvement in Performance Coatings segment margins in 2023 (excluding U.S. and Canada architectural coatings)

Negative

• Pre-tax charge of $250 million in Q4 2024 for cost reduction program
• Elimination of approximately 1,800 positions
• Low-single-digit EBITDA margin for the divested U.S. and Canada architectural coatings business

Insights

Financial Analyst

The sale of PPG's architectural coatings business in the U.S. and Canada for $550 million is a significant move that reshapes the company's portfolio. This divestiture, along with the pending sale of the silicas products business, demonstrates PPG's strategic focus on optimizing its operations and improving financial returns.

Key financial implications include:

• Removal of $2 billion in annual sales with low single-digit EBITDA margins
• Potential improvement in overall company sales volume by over 2% on a 3-year pro forma basis
• Approximately 300 basis point improvement in Performance Coatings segment margins
• Implementation of a cost reduction program targeting $175 million in annual pre-tax savings
• One-time charge of $250 million in Q4 2024 related to the cost reduction program

The strategic rationale appears sound, as PPG is divesting a lower-margin business to focus on areas with stronger growth potential and higher returns. The cost reduction program, while involving significant job cuts, should help streamline operations and improve profitability in the medium term.

Market Research Analyst

This transaction marks a significant shift in PPG's market positioning within the North American architectural coatings sector. By divesting a $2 billion revenue stream, PPG is essentially ceding market share in the U.S. and Canada to focus on regions where it holds stronger competitive positions.

The move suggests:

• A strategic pivot towards higher-growth and higher-margin segments
• Increased focus on international markets where PPG maintains #1 or #2 positions
• Potential for improved resource allocation towards innovation and market expansion in core businesses

The sale to American Industrial Partners, an industrials investor, could lead to increased competition in the North American market as the new owner may invest to grow the business. For PPG investors, this represents a trade-off between short-term revenue reduction and potential long-term improvements in growth rates and profitability. The market's reaction will likely depend on how effectively PPG redeploys the proceeds and executes its growth strategy in retained businesses.

PITTSBURGH--(BUSINESS WIRE)-- PPG (NYSE: PPG), a global leader in paints, coatings, and specialty materials, today 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.

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 today 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. 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 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.

About PPG’s architectural business in the U.S. and Canada:

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 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 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. www.americanindustrial.com

PPG Q3 Conference Call

The company will hold a conference call to review its third quarter 2024 financial performance and the agreement to sell PPG’s architectural coatings business in the U.S. and Canada, today October 17, at 8:00 a.m. ET. Participants can pre-register for the conference by navigating to https://www.netroadshow.com/events/login?show=d102d1c7&confId=71286. The conference call also will be available in listen-only mode via Internet broadcast from the PPG Investor Center at www.ppg.com. A telephone replay will be available October 17, beginning at approximately 11:00 a.m. ET, through October 31, at 11:59 p.m. ET. The dial-in numbers for the replay are: in the United States, 1-866-813-9403; Canada, 1-226-828-7578; UK (Local), 0204-525-0658; international, +44-204-525-0658; passcode 759218. A web replay also will be available shortly after the call on the PPG Investor Center at www.ppg.com, and will remain through Wednesday, October 15, 2025.

PPG: WE PROTECT AND BEAUTIFY THE WORLD®

At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and specialty materials that our customers have trusted for more than 140 years. Through dedication and creativity, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. With headquarters in Pittsburgh, we operate and innovate in more than 70 countries and reported net sales of $18.2 billion in 2023. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets. To learn more, visit www.ppg.com.

The PPG Logo, We protect and beautify the world are registered trademarks of PPG Industries Ohio, Inc.

Forward-Looking Statements

Statements contained in this press release relating to matters that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements about future events related to the sale of PPG’s architectural coatings business and statements relating to the cost reduction program, including the expected fourth quarter restructuring charge and the timing and realization of anticipated cost savings from restructuring actions. You can identify forward-looking statements by the fact that they do not relate strictly to current or historic facts. Forward-looking statements are identified by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other expressions that indicate future events and trends. Many factors could cause actual results to differ materially from the forward-looking statements contained herein. The forward-looking statements contained herein include statements relating to the timing of and expected benefits to PPG from of the sale of PPG’s architectural coatings business in the U.S. and Canada and statements relating to the cost reduction program. Actual events may differ materially from current expectations and are subject to a number of risks and uncertainties, including the satisfaction of the conditions of the transaction and other risks related to completion of the transaction and actions related thereto; the parties’ ability to complete the transaction on the anticipated terms and schedule, including the ability to obtain regulatory approvals; the amount of the net cash proceeds to PPG after customary closing adjustments and taxes; statements relating to the cost reduction program, including the expected fourth quarter restructuring charge and the timing and realization of anticipated cost savings from restructuring actions; and the other risks and uncertainties discussed in PPG’s periodic reports on Form 10-K and Form 10-Q and its current reports on Form 8-K filed with the Securities and Exchange Commission. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

All information in this press release speaks only as October 16, 2024, and any distribution of this release after that date is not intended and will not be construed as updating or confirming such information. PPG undertakes no obligation to update any forward-looking statement, except as otherwise required by applicable law.

CATEGORY Corporate

View source version on businesswire.com: https://www.businesswire.com/news/home/20241017698758/en/

PG Media Contact:

Mark Silvey

Corporate Communications

+1-412-434-3046

silvey@ppg.com

PPG Investor Contact:

Alex Lopez

Investor Relations

+1-412-434-3466

alejandrolopez@ppg.com

investor.ppg.com

Source: PPG

FAQ

What is the value of PPG's sale of its U.S. and Canada architectural coatings business?

PPG has agreed to sell its U.S. and Canada architectural coatings business to American Industrial Partners (AIP) for $550 million.

When is the PPG architectural coatings business sale expected to close?

The transaction is expected to close in late 2024 or early 2025, subject to customary closing conditions.

How much does PPG expect to save from its new cost reduction program?

PPG anticipates annualized pre-tax savings of approximately $175 million once the program is fully implemented, including $60 million in 2025.

How many jobs will be affected by PPG's cost reduction program?

PPG expects the cost reduction program to impact about 1,800 positions, primarily in Europe and the U.S.

What was the revenue of PPG's U.S. and Canada architectural coatings business in 2023?

The U.S. and Canada architectural coatings business represented approximately $2 billion of PPG's total net sales in 2023.