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Ferro Corp. has agreed to sell its tile coatings business to Pigments Spain S.L., a company of the Esmalglass-Itaca-Fritta group, which is a Spain-based portfolio company of Lone Star Funds. The deal price is $460 million in cash, with the potential for an additional $32 million in cash based on the performance of the business pre-closing, subject to customary adjustments.

Consummation of the sale is subject to the receipt of regulatory approvals and the satisfaction or waiver of other customary closing conditions.

With annual sales of approximately $510 million for the past 12 months ending Sept. 30, Ferro’s tile coatings business produces coatings for ceramic tiles used in residential and non-residential construction. Historically, it has been part of the company’s performance coatings reporting segment, along with Ferro’s porcelain enamel business, which will be retained.

"This transaction will substantially advance the Dynamic Innovation and Optimization phase of our strategy and strengthen our balance sheet,” Ferro President and CEO Peter Thomas said in a statement. “It will result in a Ferro more fully focused on higher-growth industries where our market-leading technology, innovation, and customer-centric service generate higher gross margins.

“The transaction also will reduce our manufacturing footprint and end-market exposure in Europe, optimizing our portfolio with more equal balance between Europe and the rest of world and with less exposure to commercial and residential construction markets. Given these strategic benefits, and the enhanced balance sheet resulting from the transaction, we are confident that divesting the Tile Coatings Business will deliver substantial value for our shareholders.”

Thomas added that the net proceeds from the sale principally will be used to pay down debt.

In accordance with U.S. Generally Accepted Accounting Principles, the company expects the tile coatings business will be classified as "held for sale" and reported as discontinued operations.

Lazard is acting as financial adviser and Jones Day is serving as legal counsel to Ferro on the transaction. The company expects to discuss additional details of the transaction during its fourth quarter 2019 earnings conference call.

Ferro is a global supplier of technology-based functional coatings and color solutions. Based in Mayfield Heights, the company reported 2018 sales of $1.6 billion.