What Led to PPG’s Sale of its Glass Business?

July 27th, 2016 by Nick St. Denis

It was only a matter of time. And at the halfway point of 2016, the timing was right.

Last week, PPG and Mexico-based glass manufacturer Vitro announced Vitro is purchasing the assets of PPG’s flat glass business for $750 million. Given PPG’s illustrious 133-year history in glass, the move sent waves throughout the industry—though it apparently hadn’t come as a complete shock.

Over the last decade, PPG has made no secret of its desire to get rid of its flat glass segment. In an exclusive interview with DWM, PPG vice president of flat glass Dick Beuke said the company came to believe that “glass was an important part of the business, but it was not strategic.”

“I never want to say it’s always been for sale, but we all knew if the right partner came along, we’d talk to them,” said Beuke. “And that’s what happened when Vitro approached us a couple years ago with interest in getting deeper into the U.S. business.”

The companies began discussions about a potential sale in October 2014 at the glasstec show in Germany. The opportunity moved closer to reality when Vitro sold its container business a year ago, which freed up capital to pursue an investment in the U.S. market.

Meanwhile, PPG has put an emphasis on the coatings side of the company with a handful of big acquisitions in the past two years, namely the purchase of Comex. Coatings already made up more than 90 percent of PPG’s business when it announced the sale of its glass segment last week.

With PPG’s focus on coatings and Vitro positioning itself for investment, the timing was right. PPG hadn’t received any other formal offers for the glass business, but there was interest from beyond, according to Beuke. “No one was beating the door down, but others were interested,” he said.

He said the company “learned a lot” from selling its automotive business to private equity in 2008. “[Corporate] wanted a strategic partner, and one where there was not a lot of overlap,” he said. “[PPG] was looking for someone that would keep the business alive.”

Vitro was especially interested in the research aspect of PPG’s business. “When they toured our research center in the early stages … their CEO was really impressed, and they all thought it was a good fit,” said Beuke.

Beuke said with the purchase, Vitro will retain all employees and continue to operate as usual at its facilities throughout the U.S. and Canada. “The people and the processes will be the same,” he said. “From a customer appearance, nothing should change.”

Ultimately, he said the purchase will mean bigger and better things for the business. He said PPG recognized during the latest recession that it “wouldn’t be a leader anymore from a capacity standpoint” but that the business could be a good fit for another company.

“[Vitro’s purchase] creates a leading producer of flat glass in North America,” he said. “It puts us in a strong position in size. In this business, you either have to invest in it and be committed, or you have to get out. And PPG decided it would have a better future with someone else to create that opportunity.”

This is the first in a series of stories covering the aftermath of PPG’s glass business sale to Vitro. 

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