PPG Industries, Inc. (“PPG”) is currently in discussions with Essilor International (“Essilor”) relating to the future of PPG’s and Essilor’s joint venture, Transitions Optical, a leading provider of photochromic lenses to optical manufacturers worldwide and a consolidated subsidiary of PPG. PPG is the majority shareholder in Transitions Optical, which was formed in 1990, holding a 51 percent interest in the joint venture companies. Essilor holds the remaining 49 percent interest and is also the largest customer of Transitions Optical. Transitions Optical accounted for a substantial portion of the sales and earnings of PPG’s Optical and Specialty Materials reportable segment in 2012. PPG and Essilor have worked together as business partners for more than 22 years in connection with Transitions Optical. PPG believes that both PPG and Essilor have been important contributors to the success that the Transitions Optical business has achieved. PPG cannot predict the outcome of the discussions with Essilor with respect to the future of Transitions Optical; however, PPG believes that possible outcomes may include (1) a modification of the current joint venture structure, (2) a sale of all or a portion of PPG’s interests in Transitions Optical to Essilor, or (3) a sale of all or a portion of Essilor’s interests in Transitions Optical to PPG. These outcomes may result from a negotiated transaction or from the exercise of contractual rights that exist between the parties. Under certain circumstances, which PPG does not believe have yet occurred, either PPG or Essilor may have the right to specify a price at which the other party could elect to sell its interests or buy the first party’s interests in one or more of the Transitions Optical joint venture companies. PPG also cannot predict the timing of the completion of its discussions with Essilor but expects that these discussions are likely to continue over the next several months. There is also no assurance that the parties’ discussions will result in any of the possible outcomes set forth above. While the discussions between PPG and Essilor continue, Transitions Optical intends to continue to operate its business without interruption or change in customer service. As previously announced, Transitions Optical is on schedule in expanding its new technology platforms through major new product introductions globally.
Jefferies analysts note that recent construction spending data indicates a cycle rotation away from construction-exposed names and toward industrial- and durable goods-levered firms could be playing out.