Part of success is playing to strengths.
For companies, that can mean selling off units that aren't
part of the core business.
PPG Industries (
), primarily a paints and coatings maker, had been trying to
unload its chlorine and caustic soda business for years.
Recently, PPG found a buyer.
Georgia Gulf (
) will acquire the business in a complicated $2.1 billion deal.
The commodity chemicals business -- about 11% of PPG's total
sales -- will be spun off and then merged with Georgia Gulf. PPG
shareholders will get 50.5% of the new company, and Georgia Gulf
shareholders will get 49.5%.
Most analysts see this deal as a win-win. PPG is free to focus
more on its core business, and Georgia Gulf's core business is
PPG's products also include Transition eyeglasses, a big part
of PPG's Optical and Specialty Materials segment. The segment
accounts for about 9% of total revenue.
PPG Industries has paid dividends since 1899. In June, the
company nudged the quarterly payout from 57 cents a share to 59
cents, payable to shareholders of record Aug. 10.
While the company has raised the dividend for 40 consecutive
years, the increases tend to be modest. The three- to five-year
dividend growth rate is 3%.
The annualized yield is 2.2%.
Earnings in the second quarter rose 11% from the year-ago
period, missing the Street's consensus estimate by a penny a
share. Revenue fell 1%, also a slight miss. The sales miss was
due to currency exchange. Currency reduced sales by 5%, according
to the company.
PPG's fundamentals are mixed.
On the plus side, return on equity was 31% last year, the best
in at least nine years. Pretax margin was almost 11%, the highest
in the past four years. Operating cash flow per share was 52%
greater than EPS.
PPG's Chemicals-Paints industry group was No. 6 of 197 groups,
as of Tuesday's IBD. PPG's building sector was No. 2 of 33
However, there are negatives. Sales growth has ranged from
lackluster to nonexistent the past three quarters. And the
five-year EPS Stability rating is 35 on a scale from 1 (calm) to