PPG unit sale positive despite ‘underwhelming’ price, says Deutsche

Deutsche Bank views PPG‘s (PPG) sale of its architectural coatings business in the U.S. and Canada to American Industrial Partners as a positive. While PPG held number two and number one market positions in architectural coatings in the U.S. and Canada, respectively, it found it increasingly difficult to compete versus the market leader Sherwin-William (SHW), the analyst tells investors in a research note. At an acquisition multiple of 6-times EBITDA, Deutsche views the sales price of $550M as “underwhelming.” It had estimated PPG would sell this business for $700B- $800M. However, at this point in the process and given growing investor concerns over whether PPG would be able to sell the entirety of this business, the sale of 100% of the business, even at a reduced price, will be viewed as a positive, contends Deutsche Bank. It believes the biggest winner in the transaction is Sherwin-Williams, saying it will be difficult for this now standalone business and its new private equity owner to compete effectively versus the market leader.