PPG launches strategic review: intends to sell North American architectural coatings business with annual revenue of nearly US$1.8 billion

On February 26, international coatings giant PPG Industries announced that it had hired Goldman Sachs as a financial advisor to assist in reviewing strategic alternatives for its architectural coatings business in the United States and Canada. It is reported that PPG will evaluate whether some or all of the business is more suitable for rapid development with partners or different owners, or whether it is more suitable to operate as the core business of another company, a separate entity or a joint venture. PPG explores this strategic review to ensure its continued growth and success while also maximizing value for PPG and its shareholders.

PPG's architectural coatings business in the United States and Canada, part of the company's Performance Coatings segment, is a leader in the residential and commercial architectural coatings industry with a portfolio of well-known brands including GLIDDEN®, OLYMPIC®, LIQUID NAILS®, HOMAX®, PITTSBURGH PAINTS & STAINS®, Manor Hall®, FLOOD®, DULUX® (in Canada) and SICO®, among others. The company manufactures and sells interior and exterior coatings, stains, caulk, repair products, adhesives and sealants to homeowners and professionals. It also includes certain lightweight protective coating products, which are sold primarily through company-owned stores and produced through a common factory footprint.

Overall, the distribution network includes more than 15,000 touch points, including company-owned stores, independent dealer locations and major home improvement centers and retailers in the United States and Canada. By 2023, the U.S. and Canadian architectural coatings business will account for approximately 10% of PPG's total net sales. According to the financial report, PPG Industrial’s sales revenue in 2023 was US$18.246 billion. The sales revenue of the architectural coatings business in the United States and Canada in 2023 was approximately US$1.825 billion.

Tim Knavish, PPG chairman and chief executive officer, said: "The U.S. and Canada architectural coatings business is well-positioned in growing markets with leading brands, proven innovation, established customers and dedicated and talented employees. Over the past few years, we have made great strides in modernizing our architectural coatings business model to better position the business for continued success. This includes building value-added digital tools for customers, transforming our manufacturing and distribution footprint, transitioning to an asset-light distribution model and launching innovative products that increase customer productivity and sustainability. Our actions over the past few years have created positive momentum for the business as we significantly increased the number of distribution points for well-known brands. These changes have been recognized by the industry and verified the progress of the enterprise's transformation strategy. Businesses are now poised to accelerate this transformation. "

"Given the positive momentum of the business, we are now exploring this strategic review designed to ensure its continued growth and success while also maximizing value for PPG and its shareholders," Knavish said. "We will evaluate whether some or all of the business is better suited to grow rapidly with a partner or different owners, or whether it is better suited to be operated as a core business of another company, a separate entity, or a joint venture. Our review will help determine whether any of these alternative structures can provide businesses with greater speed and the ability to accelerate growth. We will continue to fully support our U.S. and Canadian operations, employees and architectural coatings customers throughout this process. "

“In January, we announced a strategic review of alternatives for our silica products business and are currently conducting a review of our architectural coatings business in the U.S. and Canada. These actions reflect our board of directors and management team's regular and rigorous strategic review process, which includes ensuring that each of our businesses delivers value to customers and shareholders and is consistent with the company's growth and investment strategy." Knavish added.

While the business' sales are flat in 2023, PPG's overall company sales excluding the U.S. and Canadian architectural coatings business will be cumulatively improved by more than 200 basis points on a three-year forecast basis. Additionally, the company's Performance Coatings segment operating earnings, excluding U.S. and Canadian Architectural Coatings EBIT and related growth-related investments made by it, will improve segment margins by approximately 300 basis points in 2023.

The timing and outcome of the strategic review are uncertain. There is no guarantee that a review will result in any trading or other results. PPG does not intend to disclose progress or provide updates on the progress or status of the review unless it believes further disclosure is appropriate or necessary. PPG's strategic review of its architectural coatings business in the United States and Canada does not include its architectural coatings business in other regions around the world, including Latin America, Europe and Asia Pacific, where PPG holds No. 1 or 2 position.