PPG Sells Assets of Flat Glass Business to Vitro for $750 Million

Posted by Trey Barrineau and Nick St. Denis
USGNN – The USGlass News Network

PPG, a Fortune 500 mainstay that was founded as a glass company 133 years ago, is selling the assets of its flat glass business to Mexican-based manufacturer Vitro, the companies announced Thursday. PPG will receive $750 million in gross cash proceeds.

PPG has flat glass manufacturing facilities in Carlisle, Pa., Fresno, Calif., and Wichita Falls, Texas. It also has a glass fabrication facility in Salem, Ore., and four insulating glass plants in Canada.

“This transaction represents the end of an historic era for PPG as a manufacturer of flat glass, and it is another major step in our portfolio transformation to focus on paints, coatings and specialty materials,” says Michael H. McGarry, PPG president and chief executive officer. “Upon completion of this transaction, the flat glass operations will become part of a company that is focused on growing its core glass business.”

The deal is expected to close by the end of 2016, subject to customary closing conditions.

Under the terms of the agreement, PPG will divest its entire flat glass manufacturing and glass coatings operations, including the production sites in the U.S., distribution/fabrication facilities across Canada and a research-and-development center located in Harmar, Pa. PPG’s flat glass business includes approximately 1,200 employees.

PPG has expanded its coatings business in recent years through acquisitions, and today that segment makes up 93 percent of its net sales, according to the company’s 2015 financial overview. It’s now the largest coatings company in the world by revenue, according to annual rankings from Coatings World magazine. Meanwhile, the company sold its Mount Zion, Ill., flat glass manufacturing facility in mid-2014 and sold its 40-percent share in Pittsburgh Glass Works to LKQ Corp. earlier this year. PPG’s glass segment reported $1.09 billion in net sales in 2015.

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Vitro, the largest glass manufacturer in Mexico, reported $882 million in sales last year.

“This investment will strengthen our glass business for construction and enable us to take part in the U.S. and Canadian markets, as well as the high-tech solar control coatings sector, where we don’t have a major presence,” Vitro CEO Adrian Sada Cueva said in the statement.

What’s the Impact?

One analyst says the deal could be a net positive for the glass industry in the long run.

“Any time there is an acquisition, large or small, a certain amount of uncertainty and risk is created,” says Mike Collins, an investment banker and partner with Building Industry Advisors. “In the majority of cases, most of the concerns that stakeholders have are baseless and go away over a relatively short period of time. An asset that is critical for our industry is being passed from an owner that is focused on other segments to an owner that is focused on the glass segment. Vitro’s willingness to invest in additional manufacturing capacity in the future will doubtless be higher in an environment where they not only have the historical PPG business as a starting platform, but also do not have to make plans for how PPG will react, as a competitor, to their expansion. Everyone needs more glass delivered sooner than they can get it right now, so as long as Vitro runs the PPG operations in a business-as-usual manner, current PPG customers will benefit from this deal.”

Chuck Wetmore, the CEO of Kensington HPP Inc., a manufacturer of vinyl replacement windows in Vandergrift, Pa., agrees.

“PPG has always been a great supplier partner for us and I believe that the sale to Vitro will allow the glass division to have a greater focus on glass technologies than under PPG, whose focus has clearly been on paint and industrial coatings,” he said. “This should be good for all parties involved.”

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