PPG Industries agreed to buy the North American decorative paint business of Akzo Nobel for $1.05 billion, on optimism the company’s Glidden brand is poised to benefit from a recovery in construction markets.

The transaction will bring $1.5 billion in additional revenue to PPG, with 600 Akzo Nobel-owned paint stores, said the Pittsburgh-based company yesterday.

Shares of the Dutch company surged as much as 7.7 per cent, the most since September 2011. Chief executive Charles Bunch is accelerating the transformation of PPG after agreeing to sell a commodity- chemicals business making plastic pipe and siding for about $1.9 billion earlier this year.

For Amsterdam-based Akzo, it marks the culmination of years of overhauling its unprofitable North American business and the Glidden paint brand to the point where it will be “slightly” positive this year, said chief executive Ton Buechner on a conference call.

“The running sore of the US deco business will disappear from the portfolio,” said Paul Satchell, an analyst at Canaccord Genuity.

“This would be considered a poor multiple for a branded deco paints business under most circumstances, but the US element has performed remarkably badly for several years.

“The North American activities need a critical mass, and we’d need significant funds to get there and we’ve decided to employ them elsewhere,” added Mr Buechner.

PPG has earmarked an improvement in earnings of about $160 million over a three-year period, including a $60 million boost immediately upon completion of the deal, it said. The disposal announcement comes a week after Mr Buechner returned from almost three months of leave because of fatigue.

Talks with PPG started in the third quarter following a review into what the options were for the business started under former chief executive Hans Wijers, said Mr Buechner. – Bloomberg