PPG to sell controlling interest in auto glass business to Kohlberg & Company

09 July 2008

Pittsburgh-based paint and chemical maker PPG Industries has signed an agreement with an affiliate of funds managed by private equity firm Kohlberg & Company, LLC, Mount Kisco, N Y, under which PPG will divest its automotive glass and services business to a new company formed by Kohlberg.

PPG will receive $330 million in gross cash proceeds plus a minority ownership interest of approximately 40 per cent 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 $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.''

PPG had earlier attempted to sell the auto glass and services business in September to Platinum Equity (See: PPG Industries to divest auto glass businesses to Platinum Equity; To focus on coatings, specialty products) , but the $500-million leveraged buyout  transaction was terminated by the buyer who filed a lwsuit alleging that PPG had failed to provide complete and accurate information. PPG then filed a suit against Platinum seeking a $25 million termination fee. 

According to Platinum's suit, PPG initially provided a 2008 forecast of about $1.1 billion in revenue and about $140 million in Ebitda at the time of the signing, but even before the signing, PPG revised its forecast, cutting its 2008 revenue projections by more than 15 per cent and slashing Ebitda predictions by 40 per cent.

The suit is still pending with Platinum seeking to recover costs and avoid paying the $25 million breakup fee. PPG has countersued, also seeking damages including the breakup fee.