PPG Sells Architectural Coatings Business for $550 Million

On October 17, 2024, PPG Industries Inc., a prominent player in the global paints, coatings, and specialty materials sector, announced the sale of its architectural coatings business in the United States and Canada. The buyer, American Industrial Partners (AIP), agreed to acquire the business for $550 million. According to PPG, the transaction is anticipated to close in late 2024 or early 2025, subject to customary closing conditions.

This strategic move by PPG marks a significant shift in its portfolio, aiming to focus on more profitable and growth-oriented segments within its global operations. The financial terms of the agreement include adjustments for working capital and net debt. The architectural coatings division being sold is valued at approximately $2 billion in annual revenue, yet it has reported a low-single-digit EBITDA margin, which factored into PPG’s decision to divest.

PPG has also unveiled a comprehensive cost reduction program, targeting $175 million in pre-tax savings annually once fully implemented. The program is expected to save $60 million in 2025 alone. As part of this initiative, PPG is planning structural cost-cutting measures across Europe, the U.S., and other global markets, resulting in the elimination of around 1,800 positions primarily in these regions.

Tim Knavish, PPG’s chairman and CEO, expressed confidence in the transaction, highlighting the strength of the architectural coatings brands and innovation. He stated, “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.” Knavish also noted the company’s ongoing strategy to optimize its portfolio through divestitures.

American Industrial Partners, the acquirer, is a well-known industrial investor managing approximately $16 billion in assets. It focuses on driving long-term value in the companies within its diverse portfolio, which spans a range of industrial sectors.

Furthermore, PPG continues to maintain operations in other key markets such as Latin America, Europe, and Asia Pacific, where it holds dominant positions. The company’s remaining architectural coatings operations in these regions continue to be integral to its business strategy.

Amidst these strategic shifts, PPG’s performance has drawn mixed reactions from financial analysts. Seaport Global Securities retained its “Buy” rating despite PPG’s sales and profits not fully aligning with their expectations. However, they acknowledged PPG’s stable earnings per share, underscoring the potential financial benefits from lower interest expenses and tax rates.