Latest legal twist sees Tronox file counter action in US over Cristal buy-out

By Grimsby Telegraph | Posted: 29 Jan 2018

TRONOX has launched a counter legal action against the US competition watchdog as it seeks to complete the takeover of titanium dioxide producer Cristal, and with it, the huge South Bank chemical plant.

The American company has field the lawsuit against the Federal Trade Commission, seeking “declaratory and injunctive relief,” to prevent the £1.27 billion agreed deal being blocked.

Lawyers have laid the claim in Mississippi, where the company’s largest manufacturing facility is based. 

It alleges the FTC is trying to scupper the acquisition, not through the ordinary litigation process in federal court, but by solely using its administrative process to run out the clock until the transaction agreement expires. Should the deal not complete by May 21, either party can terminate, unless both agree to extend.

The deal, first announced in February last year, would make Tronox the largest company in its field based on sales and nameplate capacity, and the latest legal twist comes as the Kingdom of Saudi Arabia’s General Authority for Competition approved the proposed acquisition.

As reported, it is now facing a detailed review in Europe, but has been approved in Australia, China, New Zealand, Turkey, South Korea, and Colombia. The European Commission ‘phase two review’ has a deadline of May 15. 

SPRAWLING SITE: Cristal's Stallingborough manufacturing plant, which can produce 150,000 tonnes of titanium dioxide annually. It has operated since 1953, as Laporte, SCM, Millennium Chemicals and Lyondell.

Richard L Muglia, senior vice president and general counsel of Tronox Ltd, said: “Rather than follow its long-established practice to file suit in federal court to block an acquisition, the FTC has engaged in a strategy of delay by initiating an administrative process that offers no possibility of a timely resolution. 

“The FTC's refusal to allow a federal court to address the pro-competitive merits of the proposed transaction denies us any meaningful opportunity to demonstrate how this output-enhancing combination is designed to generate significant benefits for customers in North America and around the world. I am confident Tronox will prevail if allowed an independent judgment based on the merits of the proposed transaction by a federal court.”

When the FTC decision was announced in December last year – after an initially understood deadline following the deal being made public in February – Tronox vowed to “vigorously fight it,” with Cristal, an employer of 370 in Stallingborough, vowing to “explore all options to enable the deal to happen”. 

Tronox has said the transaction’s compelling economic rationale rests on the combined company’s ability to capture significant synergies and increase production, enabling the combined company to better compete with global market leaders and lower-cost Chinese producers who continue to increase their presence in the global market, including North America.

“This is fundamentally about fairness and the sole use of an administrative process that the FTC has scheduled to conclude only after the termination date of the transaction agreement,” Mr Muglia said. “The FTC’s conduct conflicts with any concept of supporting a US-based company with a sound strategy to compete in today’s global market.

“We strongly believe the pro-competitive case for the Tronox – Cristal acquisition is overwhelming and will benefit the entire economy, and the FTC should not be allowed to prevent the transaction by unreasonable delay or withholding action.”

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Tronox said it has fully and completely co-operated with the FTC, diligently responding to all questions and information requests, including producing more than one million pages of documents for its review. 

Of the Saudi go-ahead, a key element as the home nation of Cristal – the company which will retain a 24 per cent stake in the business it bought a decade ago – Jeffrey N Quinn, president and chief executive of Tronox, said: “We are pleased the Saudi General Authority for Competition has approved our proposed pro-competition, output-enhancing combination with Cristal. This approval is an important step toward completion of this strategic acquisition. We are confident the significant synergies we have identified will enable us to increase production and lower our cost position to the benefit of our customers around the world.”

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