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PPG Seals AkzoNobel N. American Deal

Tuesday, April 2, 2013

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PPG Industries Inc. has completed the purchase of AkzoNobel’s North American decorative paints business for $1.05 billion—more than doubling PPG's architectural coatings footprint on the continent, the companies announced Monday (April 1).

The world’s two largest paint and coatings companies announced the sale in December.

The transaction includes the Amsterdam-based paint and coatings maker’s prominent brands Glidden, Flood, Liquid Nails, Sico and CIL. Pittsburgh, PA-based PPG will also license Dulux and Devoe architectural coatings and Sikkens architectural wood products, as part of the transaction.

Brands
PPG Industries Inc.

PPG says the acquisition continues the accelerated pace of its business portfolio transformation. The deal includes prominent brands such as Glidden and Sikkens.

AkzoNobel’s North American decorative paints business had revenues of $1.5 billion in 2011, about 7 percent of the company’s total annual revenue.

The Purchase

The acquisition, the second largest in PPG history, includes all AkzoNobel North American architectural coatings manufacturing and distribution facilities, paint stores, product lines and employees related to the production, sale and distribution of architectural coatings in the United States, Canada and the Caribbean, PPG said.

PPG’s product offerings are now set to be available in more than 15,000 outlets across the region, according to Charles E. Bunch, PPG chairman and CEO.

Under the deal, PPG has added 600 paint stores, expanding its current company-owned network to about 1,000 stores.

Charles Bunch

PPG Chairman and CEO Charles E. Bunch calls the deal an "attractive way to significantly increase our scale in the North American architectural paint market, which we anticipate will benefit from a prolonged construction market recovery."

PPG has also acquired about 4,700 employees and 23 manufacturing and distribution facilities across North America under the deal.

Major facilities include those in Temple, TX; Huron, OH; and Toronto, Canada, PPG said.

“As we welcome new colleagues, our focus will be to effectively and efficiently integrate these businesses and to exceed the expectations of our customers while capturing the full earnings power of the combined organization,” Bunch said.
 
The expanded reach will bring competition for Cleveland-based Sherwin-Williams Company., which has 36 percent of the U.S. decorative paints market and operates more than 3,500 stores in the North America. Before the December announcement, PPG had 15 percent of the market and AkzoNobel held on to 13 percent, according to analysts.
 

AkzoNobel Presence

AkzoNobel’s presence in North America will now be limited to its Performance Coatings and Specialty Chemicals businesses, with combined 2012 revenues of close to $3 billion and around 5,000 employees, according to AkzoNobel.

The world’s No.1 paint and coatings company said it had decided to “divest” the decorative paints business “following a successful four-year turnaround,” in a previous statement on the deal.

“AkzoNobel has made the strategic choice to focus its Decorative Paints Business Area on key markets in Europe and its strong positions in high-growth regions,” the company said.

AkzoNobel’s CEO Ton Büchner called the deal a “good outcome for all stakeholders.”

"Over the past four years, the team has done a great job in turning the North American Decorative Paints business around," he said. "I am pleased that we have found a respected company to take over the business.”

PPG History Made

“We are pleased to have successfully completed this acquisition, the second largest in our company’s history,” said Bunch, noting the deal “further extends PPG’s architectural coatings business in the United States, Canada and the Caribbean, and continues the accelerated pace of our business portfolio transformation.”

PPG
PPG Industries Inc.

The AkzoNobel deal is the second-largest acquisition in the history of PPG Industries, the company said.

(Founded in 1883, the company’s largest acquisition was the $3.1 billion purchase of the SigmaKalon Group, a worldwide coatings producer in 2008. The transaction accelerated the company's transformation to focus on coatings and specialty products, according to PPG’s website.)

Bunch said previously that the AkzoNobel deal was an “attractive way to significantly increase our scale in the North American architectural paint market, which we anticipate will benefit from a prolonged construction market recovery.”

The acquisition also fits within PPG’s overall strategy which includes an “intense focus on generated profitable growth in all coatings segments,” according to the company.

Sales in 2012 were $15.2 billion, PPG reported.

The company also recently completed the separation of its commodity chemicals business and merger of its wholly owned subsidiary, Eagle Spinco Inc., with a subsidiary of Georgia Gulf Corp.

Immediate $60M Improvement

PPG anticipates an immediate, and significant, financial bounce from the deal, Bunch said in December.

"We expect to achieve significantly improved net operating earnings of about $160 million for the acquired business over a three-year period, including a $60 million improvement immediately upon closing and a total of $90 million by the end of the first year,” he said.

The $60 million figure includes costs that PPG will not incur due to defined benefit pension expense, amortization expense relating to prior AkzoNobel acquisitions, and various administrative costs that will not transfer to PPG.

The expected savings of $30 million by the end of the first year will stem from "cost synergies" as the company streamlines administration, distribution and manufacturing.

   

Tagged categories: Acquisitions; AkzoNobel; Architectural coatings; Business matters; Coatings manufacturers; Contractors; Decorative coatings; PPG

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