PPG to Buy Leading Architectural Coatings Business for $1B

PPG Industries will double its architectural wood coatings presence in North America with the $1 billion acquisition of AkzoNobel’s North American architectural coatings business, in a deal expected to close in early second quarter 2013, subject to regulatory approvals.

 By Keith Loria, Contributing Editor 

PPG Chairman & CEO Charles Bunch

PPG Industries will double its architectural wood coatings presence in North America with the $1.05 billion acquisition of AkzoNobel’s North American architectural coatings business, in a deal expected to close in early second quarter 2013, subject to regulatory approvals.

“This acquisition is consistent with PPG’s strategy to grow within the coatings industry,” PPG chairman and CEO Charles Bunch told Commercial Property Executive. “The AkzoNobel North American architectural business offers excellent brands, a solid company-owned store network and strong retail presence. These will complement and strengthen PPG’s positions in all major channels.”

When completed, the acquisition will significantly increase PPG’s scale in the North American architectural paint market, which Bunch anticipates will benefit from a prolonged construction market recovery. The acquired business had 2011 revenues of about $1.5 billion and “notably expands our customer reach in all three major North American architectural paint distribution channels,” he added.

The acquisition 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.

“Over the past four years, the team has done a great job in turning the North American Decorative Paints business around,” said Ton Büchner, AkzoNobel’s CEO. “I am pleased that we have found a respected company to take over the business. This agreement is a good outcome for all stakeholders.”

The deal will extend PPG’s presence in all three architectural distribution channels, expand its North American company-owned store network to approximately 1,000 and lead to share repurchases of between $500 million and $750 million expected in 2013.

The acquisition includes the addition of approximately 600 AkzoNobel-owned paint stores and complements PPG’s national home center strategy by extending its branded paint product offerings to more than 8,000 retail outlets.

Leading brands included are GLIDDEN(R), FLOOD(R), LIQUID NAILS(R), SICO(R) and CIL(R). PPG also will license the following brands: DULUX(R), DEVOE(R) architectural coatings, and SIKKENS(R) architectural wood products.

A $60 million improvement plan is anticipated upon closing, which includes costs that will not be incurred by PPG relating to defined benefit pension expense, amortization expense relating to prior AkzoNobel acquisitions and various administrative costs that will not transfer to PPG.

“The acquisition of the AkzoNobel North American architectural coatings business and planned share repurchases are both consistent with PPG’s long-standing heritage of growing our earnings and returning additional cash to our shareholders,” Bunch concluded. “We will still have an elevated level of cash even when considering these two defined uses of cash, and we expect to continue to pursue further earnings-accretive cash deployment actions during 2013.”

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