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Business

Tronox to acquire TiO2 rival Cristal

Purchase will create the world’s largest producer of the white pigment

by Alexander H. Tullo
February 21, 2017 | APPEARED IN VOLUME 95, ISSUE 9

Credit: Tronox
With the purchase of Cristal, Tronox will become the world’s largest maker of TiO2.

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.

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Comments
Jochen Winkler (February 21, 2017 6:46 PM)
I think it was about twenty years ago that DoPont wanted to buy Tioxide. At the time the anti trust vetoed. We will see what happens this time.
Alex Tullo (February 22, 2017 10:23 AM)
Indeed. I had the Plastics & Coatings beat at the Chemical Market Reporter at the time. The FTC scuttled the purchase even though no U.S. plants were included in the deal. The idea was that the big international market share would have a poisonous effect on competition. As I recall, the ICI business was very reliant on the sulfate process and DuPont was all about its chloride process. I don't know how well that pairing would have worked.
Hoffe (February 22, 2017 9:28 PM)
Thank you for the article. Very good read.

Do you mind sharing where did you get the Cristal and Tronox's capacity?
Alex Tullo (February 23, 2017 1:10 PM)
It is in the Tronox shareholder presentation for the merger.
Ramesh Balan (February 23, 2017 3:51 AM)
Cristal's sulphate process pigment plant in China, the first foreign-owned plant the the sector there, offers a strong entry into the world's biggest market.

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