PPG has reached an 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, subject to standard closing conditions. PPG will receive cash after adjustments for working capital and debt.
Goldman Sachs & Co. LLC served as PPG’s financial advisor, while Hogan Lovells U.S. LLP provided legal counsel.
Cost-Saving Initiative to Cut $175 Million Annually
PPG also announced a cost-reduction program aimed at saving $175 million annually. The company plans to save $60 million in 2025 alone. The program focuses on cutting structural costs in Europe and other global businesses. This includes closing facilities and reducing corporate costs after recent sales, including the silicas products and architectural coatings businesses.
The company will take a $250 million pre-tax charge in Q4 2024, with further charges to follow. The program will affect about 1,800 positions, primarily in Europe and the U.S.
PPG CEO’s Statement
“We’re pleased to have reached this agreement with AIP,” said Tim Knavish, PPG chairman and CEO. “This sale, along with our recent silicas business sale, highlights PPG’s active portfolio management and improves our financial performance. We’re also making tough but necessary decisions to reduce our cost structure while continuing to invest in our growth.”
PPG’s architectural coatings business in the U.S. and Canada generated approximately $2 billion in 2023, with a low EBITDA margin. Excluding this business, PPG’s Performance Coatings segment would have seen an EBIT margin improvement of 300 basis points last year.
About PPG’s Architectural Coatings Business
PPG’s U.S. and Canada architectural coatings division includes popular brands like Glidden®, Liquid Nails®, Pittsburgh Paints & Stains®, and Dulux® (Canada). The sale includes manufacturing plants in eight U.S. and Canadian locations, over 15,000 points of sale, and 750 company-owned stores. Key facilities are located in Georgia, Texas, Ohio, Nevada, and British Columbia.
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PPG to Sell U.S. and Canada Architectural Coatings Business for $550 Million
PPG, a global leader in paints, coatings, and specialty materials, has announced an agreement to sell its U.S. and Canada architectural coatings business to American Industrial Partners (AIP) for $550 million. The deal is expected to close by the end of 2024 or early 2025, pending customary closing conditions.
The sale includes the entirety of PPG’s architectural coatings business in these regions. The business, which generated $2 billion in net sales last year, encompasses popular brands such as Glidden®, Liquid Nails®, Pittsburgh Paints & Stains®, and Dulux® (Canada). AIP, an industrial investor managing approximately $16 billion in assets, will acquire the business with plans to build on its current momentum, leveraging its established brands, loyal customer base, and skilled workforce.
“We’re pleased to have reached an agreement with American Industrial Partners,” said Tim Knavish, PPG chairman and CEO. “The architectural coatings business in the U.S. and Canada has strong brands and a solid customer base. We believe AIP is well-positioned to help the business thrive and grow.”
The sale comes as part of PPG’s broader strategy to streamline its portfolio, enabling the company to focus on high-growth areas with stronger financial returns. PPG first announced it was exploring strategic alternatives for the architectural coatings business in February 2024. This transaction follows the recent sale of PPG’s silicas products division, further refining the company’s core focus.
Impact on PPG’s Performance and Future Plans
Knavish highlighted that the divestiture will allow PPG to improve its financial profile, particularly in terms of organic growth and profitability. “This transaction optimizes our portfolio and improves our financial return profiles,” he stated. “It also provides us with additional resources to invest in areas where we have a stronger competitive advantage.”
The U.S. and Canada architectural coatings business has operated within PPG’s Performance Coatings segment, which serves residential, commercial, and industrial clients. While this segment remains core to PPG’s global strategy, the company has decided to divest lower-margin businesses to enhance overall profitability. Excluding the architectural coatings business, PPG estimates that its Performance Coatings EBIT margin would have been 300 basis points higher in 2023.
Although the architectural coatings business in North America is being sold, PPG will retain similar operations in Latin America, Europe, and the Asia-Pacific regions, where it holds a leading market position. PPG remains committed to serving global customers and will continue to focus on its core competencies in these key markets.
Comprehensive Cost Reduction Program
In addition to the sale, PPG has also announced a significant cost reduction program aimed at saving the company approximately $175 million annually once fully implemented. The multi-year program, which is set to begin in 2025 with expected savings of $60 million, will focus on reducing structural costs, particularly in Europe and other global businesses.
PPG plans to streamline its operations by closing certain facilities and cutting fixed costs. The cost reduction efforts will result in a reduction of approximately 1,800 positions, primarily in Europe and the U.S. The company will record a pre-tax charge of $250 million in the fourth quarter of 2024 as part of this restructuring effort.
“These decisions are never easy, but they are necessary,” Knavish said. “We need to adjust our fixed cost base and right-size the company following the sale of these two businesses. While difficult, these actions are essential for us to remain competitive and continue to invest in growth.”
PPG’s architectural coatings division in the U.S. and Canada includes a broad footprint with manufacturing facilities in East Point, Georgia; Oakwood, Georgia; Louisville, Kentucky; and Reno, Nevada, among other locations. The business operates more than 750 company-owned stores, in addition to 6,600 independent dealer locations and over 8,000 retail outlets.
About American Industrial Partners
American Industrial Partners (AIP), which will acquire the business, is an industrial-focused investment firm with an impressive portfolio of businesses spanning a wide range of sectors, including aerospace, automotive, building products, and chemicals. AIP aims to build long-term value by working closely with management teams and implementing strategies that drive operational improvements and growth.
With over $25 billion in annual revenues and a workforce of 70,000 employees across its portfolio companies, AIP has a proven track record of acquiring and growing industrial businesses. The acquisition of PPG’s architectural coatings business aligns with AIP’s strategic focus on investing in industrial sectors with significant potential for expansion and profitability.
Conclusion
The sale of PPG’s U.S. and Canada architectural coatings business marks a significant step in the company’s ongoing effort to streamline its operations and focus on higher-margin sectors. Coupled with a major cost reduction initiative, PPG is positioning itself to drive long-term growth and profitability while maintaining its leadership position in the global coatings industry.
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