Reacts to Platinum's Attempt to Terminate PPG Agreement; PPG Shares
Continue to Drop in Value
Less than a week ago, Pittsburgh-based PPG Industries announced
that Platinum Equity, the Beverly Hills, Calif.-based company that
had agreed to purchase its auto glass businesses and services unit,
had filed suit and was attempting to terminate the agreement. (CLICK
HERE for related story.) In the aftermath, the industry is abuzz
with varying opinions on the issue.
Russ Corsi, retired manager of technical services from PPG Industries'
Automotive Replacement Glass business unit, suspects it all comes
down to price.
"Just from a business perspective, I think Platinum wants a better
deal," he told glassBYTEs.comô/AGRR magazine. The company
had previously agreed to pay $500 million for the PPG's auto glass
business and services unit.
He noted that from his review of the situation, the most pertinent
facts in the suit seem to be the changes with the Harmon and Belron
accounts mentioned. In the court documents, filed by Platinum on
December 26, the company alleges that PPG presented Belron/Safelite
as its largest customer in the auto glass replacement market and
that projected sales to Belron/Safelite contributed to the original
2008 revenue and EBITDA forecasts, but that prior to the signing
of the agreement, Belron/Safelite notified PPG that it would reduce
its purchase volumes in 2008 by as much as $27 million. It is noted
in the complaint that Belron/Safelite had made $58.5 million in
purchases from PPG in 2006 and that its second largest customer,
Harmon/Glass Doctor, purchased $23.8 million in aftermarket products
from PPG in 2006. The complaint notes that Harmon/Glass Doctor also
have notified PPG that they intend to reduce their purchase volume
by $6.2 million in 2008.
Corsi also notes, though, that budget changes are common. "I see
that they predicted different sales volumes and market figures,
and everyone adjusts their budgets based on the current [market],"
Neil Duffy, owner of Auto Glass Menders in San Jose, Calif., also
points to the current economy and market as a factor.
"One has to look at the money markets and the drying up of cheap
loans due to the subprime mess as a major culprit," he says. "I'm
sure Platinum wasn't pulling out its personal checkbook for the
He also notes that, if Platinum is permitted to terminate the agreement,
many questions will be left unanswered. "Will [the idea of] PPG
try[ing] to sell the business off in pieces be revisited? Since
PPG just bought a coatings company to underscore its new direction,
it is not a leap of faith to opine that they may be more inclined
to act more directly since a corporate decision to divest itself
of auto glass has already been determined."
PPG's Marc Talbert sent an e-mail to its customers last week assuring
them that business would continue as usual during this period of
"While we are disappointed by Platinum's actions, you can be assured
that PPG Auto Glass,PPG and the [Auto Glass and Services] management
team remain committed to continuing to provide you with the same
high level of quality products and services as you have experienced
with us historically," Talbert writes, in an e-mail dated Friday,
In other news at PPG, the company's stock is continuing to drop.
The company reported a 1.26-percent drop this afternoon, with shares
at $68.97. This is down from glassBYTEs.comô's report from last
Thursday, December 27, when PPG stocks were valued at $69.86 (CLICK
HERE for related story.)
to read the full text of the e-mail from PPG.
HERE for the latest on PPG's stocks from the New York Stock
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