Summary
Trian Partners, the “highly engaged shareholder” firm run by Nelson Peltz, recently revealed a new investment in PPG Industries.
PPG does not appear to fit into an activist’s portfolio following the standard playbook.
Trian could push for PPG to re-engage with AkzoNobel in takeover talks or to spin-off some of their smaller niche coatings businesses into a separate company.
Introduction:
On October 9th, Trian Partners filed an amended 13F which disclosed their newest investment, PPG Industries (PPG). Along with Sherwin-Williams (SHW) and AkzoNobel, PPG is one of the world’s largest coating companies.
The shares have underperformed and traded sideways over the last five years and the valuation has compressed. Recently, investors appear to be concerned with rising raw material costs and a peaking economic environment. In fact, PPG pre-announced a profit warning for the third quarter where they expect earnings to come in below expectations due to significant raw material inflation and weaker than expected demand in China.
However, the coatings industry is generally regarded as an attractive one that benefits from close customer relationships and low capital intensity which results in a mid-teens return on capital.
