SigmaKalon to give PPG access to Europe - CEO

19 July 2007 20:41  [Source: ICIS news]

HOUSTON (ICIS news)--Buying SigmaKalon would give PPG Industries greater access to markets in Europe and other parts of the world, the company's chief executive said on Thursday.

"Sigma is strong where PPG is not," said Charles Bunch, PPG's chief executive. Bunch made his comments during a conference call.

PPG said earlier on Thursday that it was in exclusive negotiations to buy SigmaKalon for €2.2bn ($3bn) from its owner, Bain Capital.

Bain had no comments.

SigmaKalon complements PPG in many ways, Bunch said. SigmaKalon is Europe's second largest coatings company, with a good presence in decorative and marine coatings.

Moreover, it is growing in emerging markets, such as eastern Europe, Asia and Africa, Bunch said. Earlier, PPG had targeted many markets within those regions for growth, Bunch said.

In contrast to PPG, SigmaKalon has a significant presence in marine coatings, he said. The acquisition "should position us in a very much stronger position for what is one of the most attractive and growing segments of the coatings business," Bunch said.

Moreover, SigmaKalon will strengthen PPG's position in Europe's general industrial segments, he said.

Since SigmaKalon complements PPG in so many ways, Bunch does not expect a lot of savings through synergies.

Early in the acquisition, synergies would make up 3% of sales, later growing to 5%, he said. The largest savings would come from raw materials.

About 80% of the acquisition will be funded by existing and new debt, said Bill Hernandez, PPG's chief financial officer.

Bunch said the deal should close by the first of 2008. In terms of 2006 sales, PPG would grow from $6.3bn to $8.7bn.

PPG's offer was expected, according to a note by Kevin McCarthy, an analyst with Bank of America Equity Research. PPG had already indicated interest in an acquisition, and SigmaKalon is a good strategic fit.

Indeed, PPG's offer follows a decades-long trend in the coatings industry.

In North American, the number coatings companies dropped from about 2,000 in 1975 to less than 900, according to The Chemark Group, a consulting firm in Southern Pines, North Carolina, that specialises in coatings.

($1 = €0.73)
By: Al Greenwood
+1 713 525 2653

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