Notes On Tronox/Exxaro

This week saw a good old fashioned back-integration deal in the chemical industry. I wrote a C&EN Latest News on the merger of Tronox with Exxaro’s Mineral Sands unit that includes the essential details. Not every factoid can make it into limited space, thus here are a few more observations:
  • Tronox’s back-integration isn’t unique. DuPont runs mining operations near Jacksonville Florida. Cristal, which is largely the former Millennium Inorganic Chemicals, has mineral sands operations in Brazil and Australia. The Brazilian mine came with Millennium’s purchase of Bayer’s TiO2 plant in Bahia, Brazil. Here’s an article I wrote about the mine back in 1998 for the then Chemical Market Reporter. Turns out, Millennium kept the mine after all. Cristal’s Australian mine is a relatively new development. In 2008, Cristal took over full control of Bemax, an Australian mining firm. It previously had a 34.5% interest.
  • The financial details are a little hairy, which I why I left them out of the C&EN story. I won’t get into them much here either. The old Tronox and the Exxaro assets will be pooled into a new holding company, which will be split 61.5%/38.5% between existing Tronox shareholders and Exxaro Resources. (There are different classes of existing Tronox shares, which is only important to Tronox shareholders.) The new company will be “domiciled in Australia”, which means technically headquartered in Australia, but will trade on a major exchange, probably the New York Stock Exchange. Exxaro is retaining a 26% stake in the South African mining operations to fulfill local regulatory operations. When those requirements eventually expire, Exxaro will have an option to swap that stake for another 3.2% of Tronox.
  • Recent share prices imply a value of $3.4 billion for the new Tronox.
  • In 2009, Huntsman Corp. tried, and didn’t succeed, to buy most of Tronox’s assets out of bankruptcy for $415 million. Incidentally, Huntsman’s last major acquisition was Ciba’s textile effects business back in 2006. Five years without a major Huntsman acquisition feels like an eternity.
  • The premise of Tronox’s acquisition is to facilitate the expansion of its TiO2 pigment business by securing a supply of ore. The company is now considering a new pigment plant in South Africa. It should be noted that Tronox’s existing joint venture with Exxaro, Tiwest, is integrated into mineral sands in Western Australia. The partnership completed a capacity expansion late last year. The 40,000-metric-ton-per-year increase brought capacity there up to 150,000 metric tons.

Author: Alex Tullo

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