US FTC seeks to block Tronox’s acquisition of Cristal TiO2 business

Source: ICIS News


HOUSTON (ICIS)--The US Federal Trade Commission (FTC) has filed a lawsuit seeking to block Tronox’s proposed acquisition of the titanium dioxide (TiO2) business of Saudi Arabia-based Cristal, Tronox confirmed in a statement late Tuesday

Tronox said it would “vigorously fight” the lawsuit as it believes that the FTC’s case is “is based on an erroneous view of the global TiO2 market and a flawed analysis of the Tronox/Cristal transaction”.

The FTC's case was premised on a “narrow and flawed view” of the size of the TiO2 market, Tronox said.

The commission, for example, focused on TiO2 produced by the chloride process, all but ignoring TiO2 produced via the sulphate process, thereby overlooking nearly half of the available product and miscalculating the market share of individual producers, including overstating the post-transaction Tronox/Cristal, Tronox said.

Similarly, the commission's proposed North American market ignored global trade flows and excludes a significant amount of TiO2 imported from Europe and Asia, Tronox said.

Furthermore, the FTC has taken the position that the market operates as an oligopoly, and the post-merger Tronox/Cristal will coordinate to restrain production.

“In fact, the combined company will have powerful incentives to run its pigment plants at full capacity, regardless of the activities of competitors,” Tronox said.

Also, the FTC believed the merger partners intend to cut pigment production unilaterally.

“The opposite is true – the transaction makes sense only if the combined firm can exploit all potential synergies to safely expand production at a lower cost per tonne,” Tronox said.

Tronox CEO Jeffry Quinn added: “The FTC bears the burden of proving to a court that this transaction violates the law”.

“While we are always willing to consider appropriate remedial action to address the commission's concerns, we maintain the transaction should be allowed to proceed and are fully prepared to defend our position in court," Quinn said.

The deal was announced on 21 February, and Tronox first filed a notification form for the deal with the FTC on 14 March 2017.