PPG Commodity Chemicals to merge with Georgia Gulf
PPG commodity chemicals business to merge with Georgia Gulf
Creates a leading integrated chemicals and building products company
PPG plans to separate its commodity chemicals business and merge it with Georgia Gulf in a tax efficient transaction valued at $2.1 billion, creating a leading global chemicals and building products company with a broad portfolio of downstream products and approximately $5 billion in revenues.
The transaction is highly complementary to strategic objectives of both companies, with significant potential to enhance value for both PPG and Georgia Gulf shareholders.
Annualized cost synergies of $115 million from the combination are expected to be fully realized in the first two years.
The greater scale and ability to capitalize on globally advantaged, low-cost North American natural gas provides a solid foundation for future growth of the merged company.
The merged company will have a strong capital structure and cash flow to support growth and return of capital to shareholders.
The transaction continues PPG’s strategic transformation into a more focused coatings and specialty products company.
PITTSBURGH and ATLANTA, July 19, 2012 – PPG Industries (NYSE: PPG) (“PPG”) and Georgia Gulf Corporation (NYSE: GGC) (“Georgia Gulf”) today announced that the boards of directors of both companies have approved definitive agreements under which PPG
will separate its commodity chemicals business and then merge it with Georgia
Gulf. This business combination is expected to deliver enhanced value for the
shareholders of both companies.
The terms of the transaction call for PPG to form a new company by separating its commodity chemicals business through a spinoff or split off, and then immediately merging the business with Georgia Gulf or a Georgia Gulf subsidiary in a Reverse Morris Trust transaction. The merger will result in PPG shareholders receiving approximately 50.5 percent of the shares of the merged company (“The Newly Merged Company”), with existing Georgia Gulf shareholders owning approximately 49.5 percent of The Newly Merged Company.
The transaction value of approximately $2.1 billion consists of $900 million of cash to be paid to PPG, approximately $95 million of assumed debt, about $87 million of minority interest, and Georgia Gulf shares to be received by PPG shareholders valued at $1.0 billion based on Georgia Gulf’s closing stock price on July 18, 2012. In the transaction, PPG will transfer related environmental liabilities, pension assets and liabilities
and other post-employment benefits (OPEB) obligations to The Newly Merged
Following completion of the transaction, which is expected to occur in late 2012 or early 2013, the combined company is expected to have annual revenues of approximately $5 billion and be the third-largest chlor-alkali producer and second-largest vinyl chloride monomer producer in North America.
“This transaction creates a global industry leader with substantial opportunities for long-term growth and enhanced shareholder value,” said Paul Carrico, president and chief executive officer of Georgia Gulf. “The combined company will be a leading integrated chemicals and building products company that we believe will benefit from significant
integration and scale, a broad portfolio of downstream products, as well as the
regional advantage of low-cost North American natural gas. This transaction is
a natural strategic fit for Georgia Gulf that provides tremendous value for all
stakeholders, including shareholders, customers, employees and the communities
in which we operate. We are excited to work together with the talented
employees of PPG’s commodity chemicals business to combine our strengths and
execute on the significant opportunities inherent in this transaction.”
PPG Chairman and CEO Charles E. Bunch said, “We are pleased to have reached this agreement as this transaction is another major step in our strategic transformation into a more focused coatings and specialty products company. This is a unique opportunity to create significant value for PPG shareholders and to share in synergies that would not be available to PPG’s commodity chemicals business on its own.”
Bunch added, “This further strengthens PPG’s already strong cash position and will provide us the opportunity to increase cash deployed for earnings-accretive activities such as acquisitions, organic growth initiatives, debt repayment and PPG share repurchases. Finally, we intend to maintain our dividend, and our long heritage of increasing our annual
Governance and Management of The Newly Merged
The merged company will be led by Georgia Gulf’s President and CEO Paul Carrico and a senior management team comprised of both Georgia Gulf and current PPG commodity chemicals employees. The board of directors will consist of the eight existing Georgia
Gulf board members and three new members to be designated by PPG, including
Michael H. McGarry, who is currently senior vice president of PPG’s commodity
chemicals business and will remain with PPG after the combination. The merged
company will have approximately 6,400 employees working at more than 40
facilities, primarily in North America.
The transaction is subject to approval by Georgia Gulf shareholders and
customary closing conditions, relevant tax authority rulings and regulatory
approvals. Debt financing has been committed by Barclays and J.P. Morgan Chase
Barclays and Houlihan Lokey served as Georgia Gulf’s financial advisors, and Jones Day served as its legal advisor. Lazard served as PPG’s financial advisor, and Wachtell, Lipton,
Rosen & Katz served as its legal advisor.