PPG’s latest challenge
Activist investor could try to shake up the coatings giant
The June morning when he went to work with a paint roller at the Carnegie Science Center on the North Shore may have been a high point in an otherwise stressful year for Michael McGarry, chairman and chief executive of PPG.
That day, wearing a business suit and tie and without splattering a drop, he helped put the final strokes of white paint on the PPG Science Pavilion, a $33 million addition to the museum for which PPG contributed $7.5 million.
After a hurried tour of the new space overlooking the Allegheny River, Mr. McGarry was back to running the $14 billion global coatings maker that has faced a series of unexpected challenges this year.
In February, home improvement chain Lowe’s said it was dropping PPG’s Olympic brand paints and stains after striking an exclusive supplier deal with PPG rival Sherwin-Williams.
In April, PPG disclosed an internal accounting scandal that resulted in a probe by the Securities and Exchange Commission, and eventually led to firing its controller and restating earnings for the first quarter of this year and all of 2017 and 2016.
Last week, the stock plunged 10 percent in one day after PPG warned that third-quarter earnings would miss projections because of higher costs and sluggish demand.
That same day, activist investor Nelson Peltz’s Trian Fund Management disclosed it has taken a nearly 3 percent stake in the company.
Trian, known for investing in companies it believes need a push to perform better for shareholders, did not specify any plans or
recommendations for PPG in an SEC filing.
But its presence could result in a board seat or recommendations for PPG management to shake up the Pittsburgh company’s strategy.
Founded in 2005, Trian’s portfolio includes past and current investments in a number of high-profile brands including Cadbury, Domino’s, Dr Pepper Snapple, Pepsico, Wendy’s and Tiffany & Co.
Its biggest play in Pittsburgh came in 2006 when Trian acquired a 5 percent stake in food business H.J. Heinz and waged a high-profile battle for two seats on the board.
Heinz was later acquired and merged with Kraft Foods in 2015.
Last year, five former Heinz directors praised Mr. Peltz’s contributions to the food maker when he was going after a seat on Procter & Gamble’s board.
He was “consistently focused on delivering longterm shareholder value,” the directors — including PPG’s former chairman and chief executive Charles Bunch — wrote in a letter to P&G directors.
In 2014, Trian won a seat on the board of Bank of New York Mellon.
Meanwhile, PPG said it is “looking forward to maintaining a constructive dialogue with Trian.”
PPG is scheduled to report third-quarter results Thursday.
The company said adjusted earnings per share are expected to range from $1.41 to $1.45, compared with analysts’ average projections of $1.53-$1.59.
Saying he was “disappointed” with the results, Mr. McGarry last week cited higher costs for raw materials and transportation, weaker foreign currencies and soft demand from China as well as some customers in the U.S. and Europe.
PPG is raising prices on automotive paints and coatings effective Nov. 1 and speeding up restructuring activities, which include reducing the global workforce by 1,100 jobs.
The company has 47,200 employees worldwide, including about 2,400 in the Pittsburgh region.
Joyce Gannon: jgannon@post-gazette.com or 412263-1580.