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PPG Wraps Up Sale of Architectural Coatings U.S. & Canada Business
PPGPPG Industries(PPG) ZACKS·2024-12-03 14:25

Core Insights - PPG Industries Inc. has divested 100% of its architectural coatings business in the U.S. and Canada for 550milliontoAmericanIndustrialPartners,whileretainingitsarchitecturalcoatingsbusinessesinotherglobalregions[1][2]−ThedivestmentispartofPPG′sstrategytooptimizeitsportfolio,enhancingorganicgrowthandfinancialreturns,allowingforbetterresourceallocationtoareasofcompetitiveadvantage[2][3]−ThearchitecturalcoatingsbusinessintheU.S.andCanadarepresentedapproximately550 million to American Industrial Partners, while retaining its architectural coatings businesses in other global regions [1][2] - The divestment is part of PPG's strategy to optimize its portfolio, enhancing organic growth and financial returns, allowing for better resource allocation to areas of competitive advantage [2][3] - The architectural coatings business in the U.S. and Canada represented approximately 2 billion of PPG's total net sales in 2023, with a low single-digit EBITDA margin [3] Financial Performance - Excluding the divested architectural coatings business, PPG's overall sales volume performance would have increased by over 200 basis points on a pro forma basis over three years [3] - The Performance Coatings segment's operational income, excluding the U.S. and Canada architectural coatings EBIT, would have seen an approximate 300-basis point increase in segment margins for 2023 [3] - PPG anticipates flat organic sales and adjusted earnings per share at the lower end of the 8.15−8.15-8.30 range for 2024 [6] Strategic Context - The transaction follows PPG's strategic review of alternatives for the architectural coatings business, initially announced on February 26, 2024 [4] - Goldman Sachs & Co. LLC acted as the sole financial advisor for PPG, with Hogan Lovells U.S. LLP serving as the legal advisor [4] Market Performance - PPG's shares have declined by 12% over the past year, compared to an 8.1% decline in the industry [5] - PPG currently holds a Zacks Rank of 4 (Sell), while other companies in the basic materials sector, such as Carpenter Technology Corporation, DuPont de Nemours, Inc., and CF Industries Inc., have better rankings [7]