PPG Industries Inc.
) announced that it has struck a deal with AkzoNobel, N.V.,
Amsterdam to buy the latter's North American decorative paint
business for $1.05 billion. The deal has been approved by the
board of directors of both the companies. It is expected to close
early in the second quarter of 2013.
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PPG will acquire all the North American architectural coatings
manufacturing and distribution facilities, paint stores and
product lines of AkzoNobel. The acquisition will include all the
employees who are engaged in the production, sale and
distribution of architectural coatings in the United States,
Canada and the Caribbean. It will also add 600 AkzoNobel-owned
paint stores to PPG's portfolio. PPG will also expand its branded
paint product offerings and cater to more than 8000 retail outlet
after the acquisition.
The acquisition is expected to enhance PPG's coatings portfolio
and increase its presence in the North American architectural
paint market. PPG expects to achieve net operating earnings of
about $160 million over a three-year period, which includes $60
million improvement immediately, upon closing of the deal and a
total of $90 million by the end of the first year of acquisition.
PPG also announced plans to reinitiate its share repurchase
program once the company completes the divestiture of its
commodity chemicals business. The company expects to spend
between $500 million and $750 million for share repurchases
during 2013. In July this year, PPG announced that it would
divest its commodity chemicals business to
Georgia Gulf Corp.
) for $2.1 billion
In October 2012, PPG released its third quarter 2012 earnings.
The company posted earnings of $2.24 a share for the quarter
(excluding one-time charges), beating the Zacks Consensus
Estimate by 3 cents. The adjusted earnings excluded charges of $9
million associated with the company's move to divest its
commodity chemicals business. Profit (as reported) rose 9% year
over year to $339 million or $2.18 a share in the third quarter,
aided by the company's cost containment measures.
Revenue edged down 0.1% year over year to $3,845 million, missing
the Zacks Consensus Estimate of $3,904 million. Sales were
adversely impacted by unfavorable currency translation. PPG
Industries saw mixed results across its end markets in the
quarter while its North American automotive OEM coatings business
recording strong growth.
PPG Industries, which competes with the DuPont Performance
Coatings segment of
EI DuPont de Nemours & Co.
), retains a short-term Zacks #3 Rank (Hold). We currently have a
long-term Neutral recommendation on the stock.