PPG Industries Inc. is again launching a sell-off of its automotive glass and services businesses, less than a year after a USD 500 million deal to sell those segments came to nothing, the company sai…
PPG Industries Inc. is again launching a sell-off of its automotive glass and services businesses, less than a year after a USD 500 million deal to sell those segments came to nothing, the company said 13 June 2008. “I am encouraged about the prospects for completing a transaction this year”, CEO Charles E. Bunch told analysts during a presentation in New York. PPG will begin to market the automotive glass business by mid-2008 and will probably discuss a variety of transaction possibilities or structures for the deal, Mr. Bunch said. PPG has nine automotive glass manufacturing plants, nine satellite assembly plants and service centers, which employ a total of about 4,400 workers. PPG planned to sell the business in 2007 to Platinum Equity LLC, a private equity firm in Beverly Hills, California. However, Platinum Equity terminated the agreement in late December 2007 and sued PPG in New York State Supreme Court, claiming it did not owe a USD 25 million breakup fee because PPG allegedly misrepresented the financial health of its automotive glass business. The case remains in the New York court. The credit market should not have an adverse impact on PPG“s ability to sell the automotive glass business because, in terms of the size of the transaction, “it much better fits in the wheelhouse of acquisitions that are being made at this time”, said William Hernandez, PPG“s chief financial officer. While the business performance of the automotive glass original equipment manufacturing has been under pressure, Mr. Bunch said the business still has strong aftermarket and services components. The weak US dollar has helped to the extent that there is less competitive pressure from imports “so the financial performance continues to be solid for these businesses”, Mr. Bunch said. Since the agreement was terminated, Mr. Bunch said PPG has completed a series of actions in preparing to remarket those businesses. PPG, the world“s second-largest coatings maker, sees solid growth rates of 20% in both the Asian and Latin American markets. The US and Canadian markets remain challenging, Mr. Bunch said. The company, like all other business, has suffered from higher energy expenses, which were primarily responsible for a USD 80 million increase in costs, Mr. Bunch said. Energy costs in the 1Q 2008 rose by USD 25 million, compared to 1Q 2007, mainly because of natural gas costs. Freight costs jumped by USD 20 million, due to higher fuel prices, and PPG found itself paying USD 20 million more for coatings raw materials, many of which are petroleum-based. PPG did raise prices that recovered almost USD 70 million of those expenses, but was not successful in offsetting all of the freight increase because diesel prices shot up about 50%, year over year, Mr. Bunch said.