UPDATE 2-PPG selling controlling interest in glass business

(Adds details on deal, share move)

NEW YORK, July 8 (Reuters) - PPG Industries Inc (PPG.N: Quote, Profile, Research) said on Tuesday it would sell its automotive glass and services business to a new company formed by private equity firm Kohlberg & Co.

PPG said it will receive $330 million in gross cash proceeds plus a minority ownership interest of about 40 percent in the new company.

The transaction will result in about $270 million in cash for PPG, to be used for general corporate purposes, the company said in a statement.

Pittsburgh-based PPG said last year it would sell the glass business to private equity firm Platinum Equity, but the $500 million deal fell apart after the buyer said it wanted to renegotiate, saying PPG had misrepresented the health of the business.

The automotive glass and services business supplies windshields, rear and side windows, sunroofs and assemblies to auto and truck manufacturers. It also supplies and distributes replacement automotive glass products to the spare parts market.

Chief Executive Charles Bunch said the deal was a step forward in PPG's portfolio transformation plan.

"It enables us to focus more on coatings and specialty products, and significantly reduces PPG's exposure to the U.S. automotive market," Bunch said in a statement.

In September 2007 PPG classified the automotive glass business as a discontinued operation. However, since it will hold a sizable ownership interest in the newly formed company, it will reclassify the business as a continuing operation in its historical and current financial statements.