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(Reuters) - PPG Industries Inc (PPG.N) has agreed to sell its $1.73 billion controlling stake in Transitions Optical, the inventor of modern variable-tint plastic lenses, to business partner Essilor International (ESSI.PA), PPG said on Monday.
The U.S. company, which had suspended a program of share buybacks pending completion of the sale, said it was looking for new opportunities to reinvest the proceeds of the deal but would also now aim to buy back another $500 million to $750 million of its own shares.
Essilor, the world's largest maker of opthalmic lenses, already holds 49 percent interest in Transitions Optical, the first company to develop plastic photochromic lenses which darken on exposure to ultraviolet light.
The deal will help Essilor boost expansion in the variable-tint lens market, which is growing twice as fast as the optical industry as a whole, mainly in Asia, Latin America and Europe.
In 2012, Transitions Optical had net sales of about $800 million.
As part of the deal, expected to close in the first half of 2014, Essilor will also acquire Intercast, an Italian-based maker of sun lenses.
Essilor said the acquisition of Transitions Optical will boost margins to 19.5 percent from year two of its integration and should have an accretive impact on earnings from the first year, expected to reach at least 5 percent per year subsequently.
Monday's transaction has an enterprise value of about $3.4 billion, with PPG receiving cash at closing of $1.73 billion pre-tax or about $1.5 billion after-tax.
The U.S. specialized chemicals company said it would look to redeploy the proceeds in core business acquisitions and share repurchases.
Chief Executive Charles E. Bunch said PPG, which previously suspended repurchases of shares due to the ongoing negotiations, was restarting its program with range of $500 million to $750 million repurchases for the year.
Essilor shares, which have gained around 6 percent of their value since the start of 2013, were trading up 3.3 percent at 83.38 euros at 0702 GMT. PPG shares closed at $157.11 in New York on Friday.
Reporting by Sakthi Prasad in Bangalore and Elena Berton in Paris; Editing by Patrick Graham