Sector News

Tronox to acquire Cristal titanium dioxide business

February 21, 2017
Chemical Value Chain

Tronox has reached agreement to acquire the titanium dioxide (TiO2) business of The National Titanium Dioxide Co. (Cristal), a company controlled by Tasnee (Riyadh, Saudi Arabia).

Tronox is acquiring the business for approximately $1.7 billion of cash and shares representing 24% ownership in pro-forma Tronox.

Combining the TiO2 businesses of Tronox and Cristal creates the world’s largest TiO2 producer with assets and operations on six continents, Cristal had 2016 revenues of $1.7 billion. The combined company will operate 11 TiO2 pigment plants across eight countries with a total capacity of 1.32 million metric tons/year (MMt/y), just ahead of current TiO2 leader Chemours’ 1.25 million MMt/y, and have titanium feedstock operations in three countries with a total capacity of 1.5 MMt/y. Chemours in its recent annual report estimated the worldwide demand for TiO2 in 2016 was approximately 5.7 MMt. Worldwide capacity in 2016 was estimated to be approximately 7.0 MMt/y.

Tronox also announced its intention to sell its soda ash business, which had 2016 revenue of $784 million and adjusted Ebitda of $149 million. The cash portion of the Cristal purchase is expected to be funded through proceeds from the sale of assets, including the soda ash business and cash on hand. Closing is expected before the first quarter of 2018. Tronox says it expects to complete the sale of its soda ash business in the second half of 2017.

The combination of the TiO2 businesses of Tronox and Cristal will bring significant value to shareholders, said Tom Casey, Tronox chairman and CEO. “Because we don’t expect to take on new debt, we project a 50% reduction in our net leverage ratio.”

EPS accretion of more than 100% is expected in year one and Tronox believes that between 2018 and 2021 projected pro-forma earnings per share, EBITDA, and free cash-flow growth rates will improve by approximately 70%, 30%, and 60%, respectively, versus Tronox on a standalone basis.

Casey adds that Tronox’s intent to sell the alkali business comes at an attractive time as the worldwide market for natural soda ash is recovering and prices are improving.

Tasnee is under pressure to reduce costs and has been restructuring. CEO Mutlaq al-Morished says, “This transaction enables Cristal and Tronox to position the combined businesses for long-term success in the TiO2 industry. This also allows Tasnee to focus on its petrochemical assets, downstream business, and other strategic business development opportunities, while substantially deleveraging its balance sheet.”

Casey will remain Tronox chairman and CEO, and the size of the company’s board will remain unchanged at nine members. Cristal’s owners will receive two of the nine existing board seats. Exxaro Mineral Resources will remain on the board with three seats. The company’s corporate offices will remain in Stamford, Connecticut and it will continue as a public company listed on the New York Stock Exchange and remain incorporated in the state of Western Australia.

Credit Suisse is acting as financial advisor to Tronox. HSBC and Perella Weinberg Partners are financial advisors to Tasnee.

By Natasha Alperowicz

Source: Chemical Week

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