Terms of the transaction, which will be structured as a Reverse Morris Trust, call for Pittsburgh-based PPG to spin off its commodity chemicals business and merge it into Georgia Gulf. Post-deal, PPG shareholders would own 50.5% of the combined entity, which has not yet been named, while Georgia Gulf holders would own the remaining 49.5%.

As part of the deal, PPG would receive $900 million in cash, and will transfer all related environmental liabilities, pension assets, general liabilities and other post-employment benefit obligations to the new entity. Debt financing has been committed by Barclays plc and JPMorgan Chase Bank NA.

Atlanta-based Georgia Gulf was put in play earlier this year after receiving an unsolicited offer from Westlake Chemical Corp. that eventually valued the company at $1.3 billion. The company rejected that offer as too low, causing Houston-based Westlake to walk away in May.

Georgia Gulf is much more enthusiastic about the PPG deal, saying the combined company would have $5 billion in sales and ranks as a top-three producer of both chlor-alkali and vinyl chloride monomer in North America. The company also said it expects to extract about $115 million in annual cost savings within two years of the deal's completion.

Georgia Gulf chief executive Paul Carrico in a statement said the transaction "creates a global industry leader with substantial opportunities for long-term growth," with the scale necessary to compete globally.

"The combined company will be a leading integrated chemicals and building products company that we believe will benefit from significant integration and scale, a broad portfolio of downstream products, as well as the regional advantage of low-cost North American natural gas," Carrico said. "This transaction is a natural strategic fit for Georgia Gulf that provides tremendous value for all stakeholders, including shareholders, customers, employees and the communities in which we operate."

Carrico will run the combination, and Georgia Gulf will hold eight of eleven board seats.

PPG chairman and chief executive Charles E. Bunch called the deal "a unique opportunity to create significant value for PPG shareholders and to share in synergies that would not be available to PPG's commodity chemicals business on its own."

Georgia Gulf received financial advice from Gary Posternack, Ken Grahame and Paul Collins of Barclays and Chris Cerimele and Andrew Stull at Houlihan Lokey Inc. A Jones Day team led by John Zamer provided legal counsel.

PPG tapped Mark McMaster and Navin Bhargava of Lazard for financial advice and turned for legal counsel to a Wachtell, Lipton, Rosen & Katz team led by Steve Rosenblum.