PPG Industries has signed an agreement with an affiliate of funds managed by private equity firm Kohlberg & Company, LLC, Mount Kisco, New York, under which PPG will divest its automotive glass and se…
PPG Industries has signed an agreement with an affiliate of funds managed by private equity firm Kohlberg & Company, LLC, Mount Kisco, New York, under which PPG will divest its automotive glass and services business to a new company formed by Kohlberg. PPG will receive USD 330 million in gross cash proceeds plus a minority ownership interest of approximately 40% in the new company, subject to closing adjustments. Net of payments to former minority interests, transaction fees, expenses and taxes, the transaction will result in approximately USD 270 million in cash to PPG. “This transaction is another positive step forward in our portfolio transformation”, said Charles E. Bunch, PPG chairman and chief executive officer. “It enables us to focus more on coatings and specialty products, and significantly reduces PPG“s exposure to the US automotive market”. The company said the net cash proceeds from the transaction will be used for general corporate purposes. The results of the automotive glass and services business were reported as discontinued operations from September 2007 and, because PPG will hold an ownership interest in the newly formed company, it will reclassify the business into continuing operations in the company“s historical and current financial statements. In the 2Q 2008, the company will record a one-time, non-cash charge to reflect a catch-up of depreciation expense, which was suspended when the business was classified as a discontinued operation. In addition, the company will also record a one-time charge related to the impact of benefit changes, including accelerated vesting, negotiated as part of the transaction. The total of these two 2Q 2008 charges is estimated at approximately USD 25 million aftertax, with the final amount pending completed actuarial calculations. The closing is subject to customary conditions, including receipt of any required regulatory approvals. PPG is expecting to record a slight book gain upon closing, which is anticipated in the 3Q 2008. Furthermore, PPG will retain certain liabilities for pension and post-employment benefits earned for service up to the date of divestiture, and there may be one-time charges in future periods related to these obligations. After completing the divestiture, PPG will account for its remaining interest in the new company under the equity method of accounting. The automotive glass and services business supplies automotive OEM windshields, rear and side windows, sunroofs and assemblies for auto and truck manufacturers, and it supplies and distributes replacement automotive glass products for use in the aftermarket. It also provides insurance claim services through its LYNX Services subsidiary, glass management software through its GTS subsidiary, and e-business solutions through its GLAXIS division. The business manufactures and fabricates automotive glass products in nine North American plants located in Berea, Kentucky; Creighton, Meadville and Tipton, Pennsylvania; Crestline, Ohio; Evansville, Indiana; Evart, Michigan; and Hawkesbury and Oshawa, Ontario, Canada. In addition, there are nine satellite parts assembly plants, and there are LYNX Services claims management centers in Fort Myers, Florida, and Paducah, Kentucky. The businesses employ approximately 4,400 people in total.