Tronox buy Cristal’s TiO2 business in $1.673 billion deal

Tronox to buy Cristal TiO2 business in $1.673 billion deal

9:00 AM, 23rd February 2017
Packing bulk bags into warehouse
Packing bulk bags of titanium dioxide into warehouse. (File photo)

STAMFORD, US: Tronox Limited (TROX) has entered into a definitive agreement to acquire the titanium dioxide (TiO2) business of Cristal, for $1.673 billion of cash and Class A ordinary shares representing 24 percent ownership in proforma Tronox.

Cristal is a privately held global chemical and mining company. It is a subsidiary of Saudi Arabia's National Industrialization Co (Tasnee).

Simultaneously with this announcement, the company announced its intent to begin a process to sell its Alkali business. The cash portion of the purchase consideration is expected to be funded through proceeds from the sale of assets, including the sale of Alkali and selected other non-core assets if appropriate, and cash on hand.

The combination of the TiO2 businesses of Tronox and Cristal creates the world's largest and most highly integrated TiO2 pigment producer with assets and operations on six continents. The combined company will operate 11 TiO2 pigment plants in eight countries with a total capacity of 1.3 million metric tonnes per annum and will have titanium feedstock operations in three countries with a total capacity of 1.5 million metric tonnes per annum.

The acquisition has received the unanimous approval of the Tronox and Cristal boards of directors. Closing is expected to occur before the first quarter 2018. Tronox anticipates completing the sale of its Alkali business in the second half of 2017.

Tom Casey will remain chairman and chief executive officer of the company (Tronox). The size of the company's board of directors 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 its three seats. The company's corporate offices will remain in Stamford, and it will continue as a public company listed on the New York Stock Exchange and remain incorporated in the state of Western Australia, Australia.

"We are pleased to announce the highly synergistic combination of the TiO2 businesses of Tronox and Cristal that will bring significant value to our shareholders, our customers and our employees. Because we don't expect to take on new debt, we project a 50 percent reduction in our net leverage ratio. EPS accretion of more than 100 percent is expected in year one and we believe that between 2018 to 2021 our projected pro forma EPS, EBITDA and free cash flow growth rates will improve by approximately 70 percent, 30 percent and 60 percent, respectively, versus Tronox standalone,” said Tom Casey.

"Our intent to sell Alkali comes at an attractive time as the global market for natural soda ash is recovering and prices are improving.  Alkali has continually sold every tonne of product it produces.  The calibre of the Alkali workforce and their commitment to safe, high-quality production are unmatched in the natural soda ash industry.  I thank the leadership team and all Alkali employees for their contributions to Tronox," added Casey.

"This agreement will create the most diverse manufacturing platform of any titanium dioxide company. The resulting global network and synergies arising from the consolidation of businesses will allow us to better meet customer needs worldwide and provide a more sustainable business. The success of the new company will come from its people, and I have no doubt that they will take the knowledge, skill, commitment and passion that they have shown in the past to help in building a new world-class company," concluded Dr Talal Al-Shair, vice chairman, Tasnee and chairman of Cristal.

Credit Suisse is acting as financial advisor to Tronox (for both the Cristal and Alkali transactions) and Kirkland & Ellis LLP and Willkie Farr & Gallagher LLP are Tronox's legal advisors.

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