Platinum Equity LLC is suing PPG Industries Inc. to terminate or renegotiate its USD 500 million deal to acquire the company“s troubled autoglass business, which the buyout firm says is in worse fina…
Platinum Equity LLC is suing PPG Industries Inc. to terminate or renegotiate its USD 500 million deal to acquire the company“s troubled autoglass business, which the buyout firm says is in worse financial shape than the seller claimed. Platinum Equity Principal Mark Barnhill said his firm was still “willing and able” to buy the division “as long as the terms fairly reflect the state of the business”. Platinum Equity filed a lawsuit in the Supreme Court of the State of New York on 27 December 2007, alleging that PPG Industries misrepresented the glass business“ financial condition in order to entice a sales agreement from the Beverly Hills, California, turnaround investor. The firm alleges that PPG Industries lied about the glass unit“s projected 2008 sales and profitability, failed to disclose that two major customers intended to reduce their purchases in 2008, concealed financial documents and blocked Platinum Equity“s access to the division“s management, “claiming they did not wish to disturb them”, the complaint says. Platinum Equity asked the court to rescind the deal, exempt it from paying a USD 25 million break-up fee, and force PPG Industries to pay compensatory damages for breach of conduct, fraud and negligent misrepresentation. The firm is also seeking to recoup transaction expenses and legal fees. PPG Industries spokesman Jack Maurer said he could not discuss the specifics of the complaint as it was a “matter of litigation”. “PPG believes that Platinum“s claims are without merit and we intend to defend ourselves against the suit”, Mr. Maurer said. The company said in a press release that “it intends to vigorously enforce its rights” under the sales agreement. It also plans to explore strategic options for the glass unit should the deal with Platinum Equity come to nothing. Platinum Equity sought to renegotiate the deal with PPG Industries after signing the purchase agreement in September 2007, when the buyout firm began getting a better idea of its financial performance. When negotiations came to a halt and with the end-of-year closing date for the deal approaching, it decided to sue. The complaint says PPG Industries initially said the glass unit would post USD 1.1 billion in sales and USD 140 million in earnings before interest, taxes, depreciation and amortization in 2008. PPG disclosed revised projections after the sales agreement that reduced estimated sales by 15% and Ebitda by 40%, according to the lawsuit. Platinum Equity claims PPG Industries withheld the revised projections until after signing the sales agreement. The complaint also charges that PPG Industries failed to disclose that its two largest customers, Belron US“s Safelite group and Harmon Autoglass, had planned to reduce their combined purchase volumes by more than USD 33 million in 2008. The lawsuit alleges PPG Industries understated pension liabilities by USD 8 million to USD 10 million, misrepresented a loss of new contracts that is expected to result in USD 84.2 million in lost revenue in 2008 and concealed plant maintenance costs of USD 6 million to USD 8 million.