Affiliates File Suit Against PPG, Allege Facts about Company Were
Representatives for Project Gamma Acquisition Corp. (PGAC) and
321796 Nova Scotia Company (NSC), which are affiliates of Platinum
Equity established in order to make the acquisition of PPG's Automotive
Glass & Services unit, say they have filed a complaint against
the latter company yesterday alleging that PPG "misrepresent[ed]
and conceal[ed] the true facts regarding the financial condition
and performance of the company they owned and operated to fraudulently
induce [Platinum] to purchase the company at an artificially inflated
The case was filed in the Supreme Court of New York County of New
Among the many points made in the complaint, they allege that PPG
had originally forecasted 2008 revenues of approximately $1.1 billion
and 2008 EBITDA of approximately $140 million, but revised this
shortly before the signing of the final agreement to predict a 2008
revenue of "over $168 million (a decline of more than 15 percent),
and a reduction in 2008 EBITDA of over $54 million (a decline of
approximately 40 percent)."
The complaint also 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.
The complaint also alleges that the largest percentage of revised
2008 revenue forecasts was from a loss of new contracts that were
expected, which had been included in the original forecast. However,
the Platinum affiliates say the loss of the new contracts were not
disclosed until the agreement with PPG was signed, resulting in
a reduction of forecasted revenues of approximately $84.2 million
PGAC and NSC go on to allege that PPG concealed this information
from them. "Defendants blocked Plaintiffs' access to management
during Plaintiffs' due diligence efforts, claiming that they did
not wish to disturb the company's management team. Defendants also
segregated the documents pertaining to the transaction in a separate
date room and restricted Plaintiffs' ability to copy or print the
documents for further review," the complaint says.
The Platinum affiliates also allege that PPG had deferred "important
and necessary maintenance at the fabrication plants, and that unplanned
expenditures of $6 million to $8 million would be needed to perform
the necessary repairs and maintenance at those plants."
Likewise, the plaintiffs claim that PPG originally had advised them
it would cost $11 million to close the company's plant in Oshawa,
Ontario, but after the signing, advised it would cost $13.6 million
to close the plant, as part of the business's restructuring. The
complaint says that since the agreement was signed, PGAC and NSC
have now learned that PPG's Hawkesbury, Ontario, and Evart, Mich.,
plants also will need to be closed, at an additional cost of $36.8
As part of the original agreement, the Platinum companies agreed
to assume Canadian pension liabilities for employees who were more
than five years away from eligibility. They allege that PPG provided
documents showing that the total amount of the pension for all active
employees would be less than $7 million, but after the agreement
was signed, advised that the pension costs would be in excess of
The plaintiff seeks "actual, compensatory and consequential
together with punitive damages and prejudgment interest,"
along with rescission of the agreement, restitution of all benefits
conferred by [Platinum] upon [PPG]."
The Platinum affiliates are represented by the law firm Bingham
McCutchen LLP. A complaint has been requested from PPG within 20
days of the summons, filed December 26.
PPG spokesperson Jack Maurer declined to comment on the suit.
"That's at this point a matter of litigation, so I'm not really
at liberty to talk about what our next steps would be with Platinum
outside of what's in the news release, which is that we intend to
'vigorously enforce its rights under its agreements with the Platinum
group,'" he says.
Platinum principal Mark Barnhill says the company is still interested
in the purchase of PPG's auto glass business, despite the suit.
"We're ready, willing and able to complete the transaction,
and we remain very interested in acquiring the [auto glass and services]
unitas long as the terms fairly reflect the state of the business,"
Barnhill told glassBYTEs.com/AGRR magazine.
for the full text of the complaint.
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