PPG sells global flat glass business to Vitro
By Patrick Flannery
July 21, 2016 – PPG today announced that it has reached a definitive agreement to sell the assets of its flat glass manufacturing and glass coatings operations to Vitro S.A.B. de C.V., a leading producer of flat glass and specialty products. The transaction is expected to close by the end of 2016, subject to customary closing conditions.
According to Frank Caporiccio, PPG’s Canadian regional sales manager, customers will not experience any change from this transition. “Vitro has bought it all, and all the employees are going with it,” he said. “I am still reporting to the same person in Pittsburgh. The only change will be the logo on the business cards.”
In an interview with Glass Canada, Dick Beuke, PPG’s vice-president of flat glass for North America, said the decision to sell was part of PPG’s strategy to maximize shareholder value by focusing the company on the area where it has its greatest revenues and global market presence: the coatings and paint sector. That division had come to dominate PPG’s portfolio over the past 20 years to the point where architectural glass accounted for only about three per cent of the corporation’s business. “It’s like anything, you either have to be big or you have to be out,” Beuke explained. “We are the number one coatings company in the world and in glass, we aren’t even global.”
According to Beuke, there was an opportunistic element to the timing of the move, as well. Glass sales are just starting to recover from the 2008 recession and the flat glass division shows potential for growth for the first time in 10 years. The deal makes sense for both sides because Vitro lacks market presence in the U.S. and Canada and PPG had little penetration into Mexico.
Access to PPG’s R&D facilities was also a key for Vitro as more low-E and insulating glass is specified in Mexico. “A lot of the places in Mexico, the specification is monolithic,” Beuke says. “Just a piece of quarter-inch glass. But all the new buildings have insulating glass units.” Beuke reports that Vitro executives were very excited to see the work going on in PPG’s Pittsburgh labs.
Beuke says Vitro will take steps to ensure timely glass supply. “They are putting in a new float plant in Monterrey so they will have two float plants there,” Beuke says. “Their Mexical operation goes down for a rebuild some time around now and they will expand their capacity there as part of the rebuild.”
Under the terms of the agreement, PPG will divest its entire flat glass manufacturing and glass coatings operations, including production sites located in Fresno, California; Salem, Oregon; Carlisle, Pennsylvania; and Wichita Falls, Texas; four distribution/fabrication facilities located across Canada; and a research-and-development center located in Harmar, Pennsylvania, near Pittsburgh. PPG’s flat glass business includes approximately 1,200 employees. The business manufactures glass that is fabricated into products used primarily in commercial and residential construction.
“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,” said 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 Chairman of the Board of Directors of Vitro, Adrián Sada González said, “Through this acquisition we will be putting together more than 200 years of experience in the production of glass and will continue to meet Vitro’s commitment to our shareholders and stakeholders of creating value, by acquiring a leader in flat glass and glass coatings technology that participates in one of the most important and high value added markets in the world.”
Adrián Sada Cueva, CEO of Vitro, said, “We are proud to announce this transaction, which represents a great success for Vitro. This investment will strengthen our construction glass business, as it will allow us to participate in the US and Canadian markets and in the segment of high performance glass coatings in which we have no significant presence. The combination of the talented teams from both companies is expected to result in a business with greater growth potential.”
PPG will receive approximately $750 million in gross cash proceeds. Upon completion of this transaction and PPG’s recently announced transaction to divest its European fiber glass operations, approximately 98 percent of PPG’s business portfolio will be focused on paints, coatings and specialty materials.