Coatings giant PPG Industries Inc. (PPG) has wrapped up the acquisition of the North American architectural coatings business of Dutch paints company AkzoNobel, N.V. (AKZOY) for $1.05 billion. This marked the second-largest acquisition in the Pittsburgh, Pa.-based company’s history.
Under the deal, PPG Industries acquired all the North American architectural coatings manufacturing and distribution facilities, paint stores and product lines of AkzoNobel. The acquisition also includes all the employees who are engaged in the production, sale and distribution of architectural coatings in the U.S., Canada and the Caribbean.
The North American coatings business, which markets the Glidden paint brand in the U.S., added around 600 AkzoNobel-owned paint stores to PPG Industries' portfolio. With the closure of the acquisition, PPG Industries’ products are now available in over 15,000 outlets in North America.
The acquisition expanded PPG Industries’ branded paint product offerings and scale in the North American architectural paint market, which is expected to benefit from a recovery in the construction market. PPG Industries expects to achieve net operating earnings of about $160 million for the acquired business over a three-year period.
PPG Industries has a diversified business, both in terms of products offered and geographical presence. It has a leading position in several paints and coatings end markets. The company looks to grow its businesses strategically along with controlling costs.
PPG Industries is also taking steps to grow its business inorganically by making a number of acquisitions. Moreover, it is pursuing restructuring of its European operation, which is expected to fetch meaningful cost savings this year.
However, the European market is expected to remain under pressure and raw material inflation and currency headwinds remain concerns for the company.
PPG Industries currently holds a short-term Zacks Rank #3 (hold).
Other companies in the chemical industry worth considering are Axiall Corporation (AXLL) and LyondellBasell Industries NV (LYB) with both holding a Zacks Rank #2 (Buy).
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