Issue Date: September 7, 2009
Huntsman To Buy Most Of Tronox
If completed, the deal will make Huntsman the world’s second largest maker of the white pigment, with a roughly 18% share of the market, according to C&EN estimates based on company documents. DuPont is the world’s largest TiO2 maker, with about 22% of capacity. Tronox is currently the third largest producer, and Huntsman is tied with Kronos in fourth place.
Tronox filed for bankruptcy protection in January (C&EN, Jan. 19, page 30). The company blamed “legacy liabilities,” such as environmental remediation and litigation, stemming from its 2006 spin-off from Kerr-McGee.
The jewel of the Tronox portfolio is its Hamilton, Miss., facility. With a capacity of 225,000 metric tons per year, it is one of the world’s largest TiO2 plants. Huntsman will also get a 90,000-metric-ton plant in Botlek, the Netherlands, and a 50% share in Tiwest, a Tronox joint venture in Australia with 110,000 metric tons of capacity. Huntsman currently has about 560,000 metric tons of TiO2 capacity.
Tronox’ TiO2 plants in Savannah, Ga., and Uerdingen, Germany, are not included in the deal. The Uerdingen plant is under the control of a German solvency court, which is seeking buyers. Tronox is now idling the Savannah facility and will auction it off later this year.
Huntsman Corp. CEO Peter R. Huntsman says the addition of the Tronox plants will help his company “realize substantial efficiencies” in its TiO2 business.
The deal also includes Tronox’ business in electrolytic materials such as manganese dioxide and lithium manganese dioxide, both used in batteries. And Huntsman will acquire Tronox’ boron products business and some sodium chlorate production in Hamilton.
Because Tronox is in bankruptcy, Huntsman has made a “stalking horse” bid, meaning it could be scuttled by a higher bid in an auction administered by the bankruptcy court later this year. If the bankruptcy court approves Huntsman’s offer, the deal will then undergo antitrust clearance.
Huntsman will finance about half of the purchase with debt, even though the company is relatively flush with cash. Hexion Specialty Chemicals signed an agreement to purchase Huntsman in 2007, but that deal fell through. In the subsequent fallout, Huntsman settled for $1.0 billion from Hexion. It also got $630 million in cash and $1.1 billion in loans on favorable terms from Deutsche Bank and Credit Suisse.
Gregg Goodnight, principal of the Pearland, Texas-based consulting firm ChemAnalysis, hails the deal as a bargain that will improve Huntsman’s TiO2 business. “They are cherry-picking some of Tronox’ better assets,” he says.
The acquisition, Goodnight adds, could be considered a bargain once earnings in the TiO2 industry start to rebound. It compares well with other acquisitions and is much cheaper than building new capacity from scratch, he says. For its $415 million, Huntsman will pick up 370,000 metric tons of annual capacity plus working capital such as inventories. Saudi Arabia’s Cristal paid $1.2 billion for 670,000 metric tons of TiO2 capacity in its acquisition of Millennium Inorganic Chemicals in early 2007, when the business climate was strong.
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