PPG Industries (NYSE:PPG) today announced that it has reached a definitive agreement to sell substantially all the assets of its Mt. Zion, Illinois, glass manufacturing facility to automotive glass manufacturer Fuyao Glass America Inc. The sale is expected to close in the third quarter 2014, subject to customary closing conditions. Financial terms were not disclosed. The Mt. Zion facility currently manufactures glass for use in residential and commercial construction markets. Fuyao plans to rebuild and retrofit the facility’s two production lines to manufacture automotive glass. PPG will continue to operate the plant for up to one year, producing SUNGATE(R) coated glass and clear glass. The production for these products will eventually be shifted to PPG’s other North American float glass manufacturing sites. The sale of the Mt. Zion facility is consistent with the strategic initiative by PPG’s flat glass business to focus on its higher-technology, coated glass capabilities for residential and commercial construction application. “Glass coatings technology remains the engine of our growth and we plan to make incremental technology investments in our facilities to improve our current capacity for better-performing, low-e glass and to expand our overall technical capabilities for newer, more advanced products,” said Richard Beuke, PPG vice president of flat glass. In regard to the Mt. Zion facility, Beuke added, “Fuyao has been PPG’s business partner for 13 years and is a well-respected glass manufacturer and fabricator. We look forward to an ongoing collaborative relationship with Fuyao in North America as a PPG technology licensee. The Mt. Zion facility is ideally suited for their automotive glass mission, given its geographic proximity to major automotive manufacturers and history in automotive glass production.” PPG’s flat glass business unit manufactures high-performing coated glass, tinted and clear float glass primarily for the residential and commercial segments of the construction industry, as well as other specialty glass markets. The Mt. Zion facility was built in 1959 and converted for float glass production in 1978.
Jefferies analysts note that recent construction spending data indicates a cycle rotation away from construction-exposed names and toward industrial- and durable goods-levered firms could be playing out.