PPG sells commodity chemicals unit in $2.1B deal

PPG Industries Inc. is spinning off its commodity chemicals business in a deal with Georgia Gulf Corp. worth $2.1 billion.

Under a deal announced on Thursday, Atlanta-based Georgia Gulf will buy the PPG business for $900 million in cash and $1 billion in shares to build scale and lower production costs for products such as chlorine and caustic soda.

The two companies have a long-standing relationship, and both boards of directors approved the agreement.

“The transaction complements the strategic initiatives of both companies, and is a unique opportunity to create value for both sets of shareholders,” PPG CEO Charles E. Bunch said during a conference call.

Bunch called the move “another strategic step for PPG to continue its transformation into a more focused coatings and specialty materials company.”

Downtown-based PPG plans to spin off or split the unit into a separate business before handing it over. The total price of the deal also includes $182 million in debt and minority ownership interests.

PPG shareholders will receive 50.5 percent of the new company's shares, and Georgia Gulf shareholders will get the rest. Georgia Gulf's CEO and a management team that includes current Georgia Gulf and PPG chemicals employees will lead the new company.

The merged company will have about 6,400 employees at more than 40 locations, primarily in North America, PPG said.

The commodity chemicals business is headquartered at PPG's Monroeville office, but the production facility closest to the Pittsburgh region is the Natrium chemicals plant near New Martinsville, W.Va., with about 500 employees, spokesman Jeremy Neuhart said.

Some employees in Monroeville and a small number at the Downtown corporate headquarters would transfer to the new company, Neuhart said.

The Monroeville facility is an administrative and research center for silica and optical products as well as chemicals. In all, 250 people work there, but Neuhart said he could not specify how many are with the commodity chemicals unit.

The deal should close later this year or in early 2013 and is subject to Georgia Gulf shareholders' approval and regulatory OKs.

PPG's commodity chemicals unit makes products such as chlorine for use in agricultural products, water treatment and plastic and paper production. The business accounted for $427 million, or 11 percent, of PPG's overall second-quarter sales.

For now, commodity chemicals operations in Monroeville will run as usual, Neuhart said, adding the new company “intends to maintain a significant employee presence in the Pittsburgh region.” The Natrium facility also will operate as usual and is to be transferred to the new company.

Separately, PPG posted its highest-ever profit in the second quarter. The company earned $362 million, or $2.34 per share, compared with $340 million, or $2.12 per share, a year earlier. Revenue in the second quarter slipped slightly to $3.96 billion.

PPG said it was able to overcome significant weakness in European and Latin American currency exchange rates through cost controls. Looking ahead, PPG expects continued challenges in its European business and inconsistent growth in North America and Asia.

PPG shares closed at $111.96, up $7.77. Georgia Gulf's stock also rose, ending the day at $32.67, up $3.82.

Georgia Gulf's Building Products division has a plant in Delmont that makes vinyl windows and door profiles, or frameworks. Company spokesman Alan Chapple said 61 people work there.

Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or kleonard@tribweb.com.