The deal, announced Thursday, will make Georgia Gulf the third-largest producer of chlorine and caustic soda in North America.

The spinoff will help PPG narrow its focus on its performance coatings and industrial coatings, which make up more than half of total sales. PPG also makes the popular Transitions line of eyeglasses.

PPG also reported higher second-quarter earnings on Thursday.

Georgia Gulf snubbed a $1.9 billion takeover offer from commodity chemicals maker Westlake Chemical in May, saying it could produce more value for investors on its own.

Analysts see a move toward consolidation among chemical companies, given their cushy cash balances.

Olin Corp. on Wednesday agreed to buy privately held K.A. Steel Chemicals Inc. for $328 million to bulk up production of chlor-alkali chemicals.

COMPLEX DEAL

PPG will spin off its commodity chemicals business and then immediately merge it with Georgia Gulf in a complex deal known as a Reverse Morris Trust transaction.

PPG shareholders will get 50.5 percent of the shares of the new company, and Georgia Gulf shareholders will own the rest.

Georgia Gulf will pay PPG $900 million in cash and assume about $95 million of debt. PPG shareholders will also get about $1 billion in Georgia Gulf shares, based on the stock's Wednesday closing price of $28.85 on the New York Stock Exchange.

Also, Georgia Gulf will spend $87 million to acquire a minority interest in PPG.

Georgia Gulf shares rose 13.5 percent in premarket trade. PPG shares were up 1.7 percent.

After the deal closes — expected later this year or early in 2013 — Georgia Gulf's board of directors will consist of eight present board members and three new members nominated by PPG.

PPG on Thursday also reported a 6.5 percent rise in second-quarter profit to $362 million, or $2.34 per share. Revenue was little changed at $4 billion.

Sales in the commodity chemicals segment fell 9 percent to $427 million on lower volumes and weak chlorine demand. The segment accounted for about 11 percent of PPG's quarterly sales.

Barclays and Houlihan Lokey advised Georgia Gulf on the PPG deal, while Lazard served as PPG's adviser.