Tronox to acquire TiO₂ rival Cristal

In a deal that will establish the world’s largest producer of titanium dioxide, Tronox is purchasing Cristal for $1.7 billion in cash, plus stock. Tronox says it’s putting its soda ash business on the selling block to help pay for the transaction.

“We are very excited to have signed this agreement with Cristal,” Tronox CEO Tom Casey said in a conference call earlier today with analysts. “They have TiO₂ operations that are highly complementary with Tronox’s asset base.”

Casey noted that the two companies have been discussing a possible transaction for nearly 18 months. National Industrialization Co. of Saudi Arabia, known as Tasnee, owns 79% of Cristal. Tasnee and other shareholders will retain a 24% stake in the combined Tronox.

Cristal is the second-largest producer of the white pigment in the world, with 860,000 metric tons of annual capacity. It had 2016 sales of $1.7 billion. The company operates eight TiO₂ plants globally, including one in Saudi Arabia. It purchased the bulk of the business from LyondellBasell Industries in 2007.

Tronox is the world’s sixth-largest TiO₂ producer with 470,000 metric tons of capacity. It posted $1.3 billion in TiO₂ sales last year and operates three pigment plants.

Combined, the two companies will edge out Chemours, the DuPont spin-off, as the world’s largest TiO₂ maker. In addition, the combined firm will have a 15% share of world mineral sands production, making it the second-largest producer of the TiO₂ pigment raw material.

Feedstock integration is one rationale for the deal. Before the merger, Tronox had excess mineral sands production that it sold on the merchant market. Combined with Cristal, it will be able to consume all the ore it pulls out of the ground. Additionally, Tronox, which has a heavy presence in North America and Asia, will be more balanced regionally after the deal.

Tronox says it has initiated discussions to sell the soda ash business, which it purchased from FMC in 2015. The Wyoming-based operation had nearly $800 million in sales last year.

The TiO₂ business suffered from overcapacity in recent years but is staging a comeback, according to Fitch Ratings. Closures over the past two years have “helped thin the global supply glut,” the credit agency says.

Jefferies stock analyst Laurence Alexander told clients that the purchase will further consolidate the market and support higher TiO₂ prices. The deal could also serve as a benchmark for the valuation of Venator, the TiO₂ business that Huntsman Corp. is spinning off later this year.