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PPG Industries (PPG - Analyst Report) has wrapped up the earlier announced sale of its majority stake in Transitions Optical joint venture and its fully-owned optical sunlens business to ophthalmic lenses giant Essilor International. The PA-based coatings giant landed the deal in Jul 2013.

Transitions Optical, which was formed in 1990, is a leading supplier of photochromic lenses to optical makers globally. PPG Industries and Essilor held 51% and 49% stake in the joint venture, respectively. Transitions Optical and sunlens business had combined net sales of $874 million last year.

The total enterprise value of the transaction is around $3.4 billion with PPG Industries receiving $1.73 billion (pre-tax) or around $1.5 billion (post-tax) in cash at closing of the deal, subject to certain post-closure adjustments and transaction costs.

All sales related to Transitions Optical have been consolidated in PPG Industries’ financial statements. Results of Transitions Optical and sunlens business will be classified as discontinued operations in the company’s future financial statements. Moreover, PPG Industries has updated its tax rate expectations on ongoing earnings from continuing operations for 2014 and it now expects the rate to be in the band of 23.5% to 24.5%.

Transitions Optical represented a meaningful portion of PPG Industries’ Optical and Specialty Materials division last year and has been a major growth driver for the company for more than two decades. The stake sale places Transitions Optical as a core business within a leading global optical company in a rapidly changing optical industry.

PPG Industries has a diversified business, both in terms of products offered and geographical presence. It has a leading position in several paints and coatings end markets.  

Revenues from the Optical and Specialty Materials segment rose 14% to $309 million in fourth-quarter 2013 on improved optical products volumes and higher silicas sales on strong demand. The division accounted for roughly 8% of total sales for the quarter.

PPG Industries is seeing healthy momentum across aerospace and automotive markets and envisions favorable conditions across these end-markets in 2014. The company is also taking steps to grow its business inorganically by making a number of acquisitions.

However, PPG Industries may continue to face softness in Europe and remains exposed to raw material cost pressure and sluggishness across some of its key end markets.

PPG Industries is a Zacks Rank #2 (Buy) stock.

Other companies in the chemical industry with favorable Zacks Rank include Methanex Corporation (MEOH - Analyst Report), The Dow Chemical Company (DOW - Analyst Report) and Olin Corp. (OLN - Snapshot Report). All retain a Zacks Rank #2 (Buy).

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