LKQ Corp. (Nasdaq: LKQ), an auto parts company, has agreed to acquire Pittsburgh Glass Works LLC (PGW) from private equity firm Kohlberg & Co. and minority owner PPG Industries Inc. (NYSE: PPG), a provider of chemicals to the automotive industry. The transaction is expected to close during the second quarter of this year.
Chicago, Illinois-based LKQ will finance the $635 million acquisition with borrowings under its $2.2 billion revolving credit facility. The company says the purchase of PGW reflects its commitment to providing one-stop-shopping to the North American collision repair industry.
“PGW is the largest pure-play provider in the $3.5 billion North American automotive glass market,” says Robert L. Wagman, president and CEO of LKQ Corporation. “This acquisition will expand our addressable market in North America and globally; and simultaneously offers tremendous distribution synergy opportunities with our existing network.”
Acquisitions in the auto parts industry have increased recently, simultaneously with auto sales. A steady decline in gas prices, cheap financing for purchases and markdowns have helped accelerate the increase in sales, leading to a demand for more vehicles and growth in manufacturing.
Recent transactions in the auto sector include Illinois Tool Works Inc.’s (NYSE: ITW) $450 million acquisition of ZF Friedrichshafen AG’s engineered fasteners and components business and Harman International Industries Inc.’s (NYSE: HAR) purchase of automotive cybersecurity company TowerSec. Both deals were announced in January.
Jefferies LLC and Nomura Securities served as financial advisers to PGW for the deal; legal counsel for the company is Ropes and Gray. K&L Gates acted as legal counsel to LKQ.
With this transaction, PPG will divest its 40 percent minority ownership interest in PGW, which the company has held since 2008. Pittsburgh-based PPG won Mergers & Acquisitions Strategic Buyer of the Year award for 2014, when it purchased four middle-market targets. Kohlberg & Co. was formed in 1987, when Jerome Kohlberg, Jr. resigned from Kohlberg Kravis Roberts & Co. over differences in strategy.