(By Balaseshan) PPG Industries Inc. (NYSE: PPG), a supplier of protective and decorative coatings, said it has agreed to buy the North American architectural coatings business of Dutch chemicals group AkzoNobel N.V. for $1.05 billion.
The acquisition includes the addition of about 600 AkzoNobel-owned paint stores creating a combined network of about 1,000 company-owned stores serving the North American market.
The acquisition includes all AkzoNobel North American architectural coatings manufacturing and distribution facilities, paint stores, product lines and employees related to the production, sale and distribution of architectural coatings in the United States, Canada and the Caribbean.
"We expect to achieve significantly improved net operating earnings of about $160 million for the acquired business over a three-year period, including a $60 million improvement immediately upon closing and a total of $90 million by the end of the first year," said Charles Bunch, PPG chairman and CEO.
The $60 million improvement anticipated upon closing includes costs that will not be incurred by PPG relating to defined benefit pension expense, amortization expense relating to prior AkzoNobel acquisitions and various administrative costs that will not transfer to PPG.
The expected incremental savings of $30 million by the end of the first year and an additional $70 million by the end of the third year following the acquisition include cost synergies stemming from overlap in administration, distribution and manufacturing, the company said.
Additionally, and in recognition of strong cash position, PPG plans to reinitiate its share repurchase program immediately following the completion of the separation of its commodity chemicals business, which is expected to occur in early 2013.
PPG anticipates a base level of spending between $500 million and $750 million for share repurchases during 2013. Bunch said the acquisition of the AkzoNobel North American architectural coatings business and planned share repurchases are both consistent with PPG's long-standing heritage of growing its earnings and returning additional cash to its shareholders.
"We will still have an elevated level of cash even when considering these two defined uses of cash, and we expect to continue to pursue further earnings-accretive cash deployment actions during 2013," Bunch concluded.
PPG closed Thursday's regular session up 0.53% at $125.21. The stock has been trading between $78.80 and $128.42 for the past 52 weeks.