Tronox Will Acquire FMC’s Soda Ash Business

Tronox, a producer of the white pigment titanium dioxide, has agreed to purchase FMC’s soda ash business for $1.6 billion.

For that price, Tronox will get the world’s largest producer of natural soda ash, or sodium carbonate, which is used to make glass, detergents, sodium bicarbonate, and other chemicals. FMC has a 25% share of the natural soda ash market. Its mining operations in Green River, Wyo., sit atop the world’s largest reserves of trona, a mineral used to make soda ash. The business generated about $800 million in sales last year.

Tronox is seeking diversification in inorganic chemistry. Tronox, which merged with the mineral sands operations of the South African mining giant Exxaro Resources in 2012, is familiar with mining operations.

Not an insignificant consideration for the purchase is more than $2 billion in U.S. tax credits for previous losses. The company can only take advantage of these credits if it has income from U.S. operations that can be taxed. Without this acquisition, Australia-based Tronox doesn’t have enough U.S.-based income to count the tax benefits as an asset. Tronox says it is considering further acquisitions.

Analysts see the logic in the deal. “Soda ash is among the better fits that Tronox could buy, in our view,” notes UBS stock analyst John E. Roberts. “End markets are obviously different, and we are unaware of any other company combining the two.”

FMC had originally intended to spin off the soda ash business along with its lithium chemicals unit. However, when it agreed to purchase the agricultural chemicals maker Cheminova last September, it decided instead to keep lithium and divest soda ash.

Over the past two decades, nearly the entire U.S. soda ash industry has changed hands. South Korea’s OCI purchased Rhône-Poulenc’s business in 1996. FMC purchased upstart American Soda in 2003. India’s Nirma bought Searles Valley Minerals in 2007. And another Indian firm, Tata Chemicals, bought General Chemical’s soda ash operations in 2008.