PPG Industries has entered into a definitive agreement to snap up Finnish paint and coatings producer Tikkurila, in an all-cash deal valued at €1.1 billion ($1.35 billion), including the assumption of debt.
Under the terms of the agreement, PPG (PPG) will start a tender offer to buy all of the issued and outstanding stock of Tikkurila at €25 in cash for each share. The offer price represents a premium of about 66.2% to the company’s closing price on December 17. The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions.
The paints and specialty materials supplier said that the combination with Tikkurila will strengthen and broaden its geographic footprint as well as its product offerings in several northern and eastern European countries where it has minimal decorative presence.
“We will be able to provide customers with even more paint and coatings options by bringing together Tikkurila’s high-quality and environmentally friendly decorative products and distribution capabilities in these countries with PPG’s well-respected industrial and protective coatings,” said PPG CEO Michael McGarry. “In addition, the combination will provide new cross-selling opportunities, growth opportunities for employees, and product solutions for new segments and customers.”
Founded in 1862, Tikkurila is headquartered in Vantaa, Finland with operations in 11 countries. More than 80% of the company’s revenue is coming from Finland, Sweden, Russia, Poland, and the Baltic states. Its premium brands include Tikkurila, ALCRO, and Beckers. Tikkurila employs about 2,700 people globally and reported sales of about €564 million in 2019.
The buyout deal comes less than a month after PPG announced the acquisition of Ennis-Flint, a global coatings manufacturer with a portfolio of pavement marking products, for about $1.15 billion.
Following the deal announcement, Deutsche Bank analyst David Begleiter lifted the stock’s price target to $165 (13.5% upside potential) from $155 and maintained a Buy rating.
Begleiter said that PPG’s acquisition of Ennis-Flint is “strategically sound ” since it strengthens the company’s mobility coatings franchise and puts the business on a pathway for for accelerated growth as autonomous driving boosts the need for wider, more visible, more reflective and more durable roadway markings.
Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 7 Buys and 5 Holds. With shares up about 9% year-to-date, the average price target of $151.09, now implies upside potential of 3.9% to current levels.