Major extension agreed for troubled Tronox takeover of Cristal to complete

By Grimsby Telegraph | Posted: 5 Mar 2018

Titanium dioxide giants Cristal and Tronox have agreed a significant widening of the window in which to complete the proposed merger, after the deal was called in by officials in Europe and the States. 

Having initially set a deadline for May 21, the action by officials on both sides of the Atlantic has seen the timeframe extended.

The deal, which would see the huge production plant at Stallingborough change hands for a sixth time, will now run to March 31 next year if required, with three month extensions rolling from June 30.

The US giant has not had to pay an extension fee to what is an agreed purchase price of £1.27 billion, but it will now face a termination fee of $60 million (£43.4 million) if either party terminates due to failure to obtain regulatory approval, or if Tronox calls it off before the end of the year in the belief regulatory approval is not likely to be obtained. 

Jeffry N Quinn, president and chief executive at US-headquartered Tronox, said: “The extension reflects the commitment of Tronox, Cristal, and its parent company, Tasnee, to this transaction. Although we do not anticipate needing the full extension to consummate the transaction, the amendment provides adequate time to optimise the outcome for the benefit of our collective stakeholders – our shareholders, customers and employees.

“This is a highly synergistic transaction that will lower our cost position and increase supply.  While this amendment provides more time for the competition-enhancing nature of this transaction to be determined on its merits, our goal remains to consummate the transaction as quickly as possible.  We will continue to work with regulatory authorities in the United States and Europe to find an appropriate and proportionate resolution to any valid concerns.”

First announced in February last year, the deal would make Tronox the largest company in its field based on sales and nameplate capacity. In Cristal’s homeland, the Kingdom of Saudi Arabia’s General Authority for Competition approved the proposed acquisition, which would see it retain a 24 per cent stake, and while a detailed review is underway in Europe, with a ‘phase two review’ deadline of May 15, it has been cleared in Australia, China, New Zealand, Turkey, South Korea, and Colombia. 

In the US the Federal Trade Commission is seeking to block, with Tronox launching a counter-action

It comes as Tronox posted strong annual results, with revenues up 30 per cent year on year, to £1.22 billion. 

Income from operations was reported at £99.8 million; with adjusted EBITDA of £303 million, up 153 per cent on 2016. 

Mr Quinn said: “The fourth quarter provided a strong finish to a very successful year for us strategically, financially and operationally.  We continued to build on the momentum generated in earlier quarters – momentum that we see continuing in 2018.  Our TiO2 business delivered robust performance in the quarter, posting revenue growth of 32 per cent, a more than five-fold increase in income from operations, adjusted EBITDA growth of 95 per cent and an adjusted EBITDA margin of 34 per cent.  This high level of performance clearly reflects the benefits of our vertical integration, as both our pigment and mineral sands operations delivered strong revenue and profit growth.  

“Our results also reflect the extraordinary work by our global TiO2 team to reduce costs through the successful implementation of their operational excellence program.  We are confident that 2018 will be another year of strong performance and a transformational one for us as we look forward to closing the Cristal TiO2 acquisition and unlocking for our shareholders the significant value inherent in the combination.”

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