Tronox announces definitive agreement to acquire Cristal TiO2 business

Tronox Limited has announced a definitive agreement to acquire the TiO₂ business of Cristal, a privately held global chemical and mining company, for US$1.673bn of cash and Class A ordinary shares representing 24% ownership in pro forma Tronox. Concurrently 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 1.3Mt/yr and will have titanium feedstock operations in three countries with a total capacity of 1.5Mt/yr.

"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," 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 we believe that between 2018 to 2021 our projected pro forma EPS, EBITDA and free cash flow growth rates will improve by approximately 70%, 30% and 60%, respectively, versus Tronox standalone. We believe this combination presents an extraordinary opportunity to build a global leader that will offer the best results to customers, shareholders, creditors and employees."

"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 ton of product it produces. The caliber 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.

Tasnee CEO Mutlaq Al-Morished commented, "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."

"This agreement will create the most diverse manufacturing platform of any titanium dioxide company. The resulting global network and synergies arising from 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," said Dr Talal Al-Shair, Vice Chairman, Tasnee and Chairman of Cristal.

The acquisition has received the unanimous approval of the Tronox and Cristal boards of directors. The transaction is subject to the approval by Tronox Class A and B shareholders, voting as a single class, as well as regulatory approvals and customary closing conditions. Closing is expected to occur before Q1, 2018. Tronox anticipates completing the sale of its Alkali business in the second half of 2017.

Tom Casey will remain Chairman and CEO of the company. 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, Conn., 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.

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.