PPG, Essilor may make transition

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PPG Industries issued a surprise announcement Monday that it is in discussions with Essilor International, its partner in the Transitions Optical joint venture, about whether one of the partners might buy out the other or whether to restructure the venture's terms.

But the company's top executive declined to elaborate on the news when pressed by securities analysts during a previously scheduled conference call about PPG's fourth-quarter and full-year earnings for 2012.

Downtown-based PPG owns a majority 51 percent stake in Transitions, which produces the technology that makes eyeglass lenses tint dark in sunlight; Essilor, a French lens maker, holds 49 percent.

As PPG has shed some old-line businesses in recent years, including automotive glass, it has held up Transitions as one of its solid growth engines.

The venture, based near Tampa, Fla., and launched in 1990, has estimated annual sales of more than $500 million.

Asked by several analysts during the earnings call about why PPG is in talks with Essilor about Transitions' future, Chairman Charles Bunch said the company would provide no further information but hinted the announcement might have something to do with disclosure requirements related to the pending sale of its commodity chemicals business.

PPG said in July it would spin off its commodity chemicals business and sell it to Georgia Gulf Corp. for about $2 billion.

In the call with analysts, Mr. Bunch said, "We are in the exchange period [on the Georgia Gulf deal] and we are aware ... of our disclosure obligations around the transaction, and we felt that it was appropriate for us to issue the press release. ... We're not really going to give a lot more color on the press release."

According to the company's news release, issued simultaneously with the earnings report Monday morning, terms of the current PPG-Essilor venture specify that under certain circumstances either partner may be able to specify a price at which the other could sell its interests or buy out the other. Mr. Bunch declined to say what those circumstances are.

"There is also no assurance that the parties' discussions will result in any of the possible outcomes," the release said.

Rick Elias, chief executive of Transitions and senior vice president, optical and specialty materials for PPG, said in a phone interview later Monday afternoon that the company thought it was appropriate to mention the joint venture talks in order to be "totally transparent" in light of the Georgia Gulf deal as well as PPG's planned purchase of the North American coatings business of Dutch company Akzo Nobel for $1.05 billion.

"There's nothing imminent; nothing that has happened," Mr. Elias said.

PPG and Essilor have held discussions about possible changes "almost over the life of the venture," he said.

"In terms of what could happen, I don't know. It could be restructured, or there could be changes in ownership ... or nothing might happen."

Transitions has about 1,800 employees worldwide, "and the important thing is that it's been business at usual," Mr. Elias said.

For the fourth quarter, PPG said net income rose to $227 million, or $1.46 per share, including after-tax charges related to acquisitions and the pending spinoff of the commodity chemicals business. Sales for the quarter were $3.6 billion, up slightly from $3.5 billion in the fourth quarter of 2011.

Adjusted net income excluding the charges was $238 million, or $1.53 per share, in line with analysts' consensus estimates.

Commenting on the results, Mr. Bunch said PPG had "an exceptional year ... despite moderate overall economic conditions that varied by region and end-use market, and continued negative impacts from currency translation."

For the full year, net income fell to $941 million, or $6.06 per share, from 2011 net income of $1.1 billion, or $6.87 per share.

Sales for all of 2012 totaled $15.2 billion, up 2 percent from 2011 sales of $14.9 billion.

Meanwhile, Georgia Gulf Monday said it will change its name to Axiall Corp. after its deal with PPG is finalized. The company said it wants to break from the legacy names of both PPG and Georgia Gulf as it seeks new markets. Its shares will trade on the New York Stock Exchange under the symbol AXLL.

In trading Monday, PPG shares fell $1.07 to $141.03. Shares in Georgia Gulf rose 41 cents to $50.39.

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Joyce Gannon: jgannon@post-gazette.com or 412-263-1580.


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