US Tronox confident on Cristal TiO2 deal, despite FTC objections – CEO

HOUSTON (ICIS)–US titanium dioxide (TiO2) producer Tronox remains confident about completing its planned acquisition of the TiO2 business of Saudi Arabia-based Cristal – despite objections from a US regulatory authority, the company’s CEO said in an update on Thursday.

The US Federal Trade Commission (FTC) this week filed a lawsuit seeking to block the acquisition.
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Tronox CEO Jeffry Quinn said in a webcast conference call that Tronox is prepared to consider “appropriate and reasonable remedial action” to address regulatory concerns – both in the US and in Europe – to obtain approvals.

While Tronox has received approvals for the deal from six out of nine jurisdictions, reviews in the US, the EU and Saudi Arabia are ongoing.

“There is a range of potential actions” that would work for Tronox while addressing any regulatory concerns, Quinn said.

He did not detail what specific remedies Tronox may be willing to consider.

However, he said if Tronox had to divest a US TiO2 asset, or part of a US assets, this would not, in the current market conditions, materially diminish the Cristal deal’s overall attraction.

As for the timing, he said that any agreed remedies should be “a matter of additional months, and not additional quarters”.

Analysts had previously speculated that US regulators may ask Tronox to divest Cristal TiO2 assets in Ohio. Cristal has two TiO2 plants at Ashtabula, Ohio.

As for the FTC lawsuit, Quinn reiterated that Tronox and the FTC disagreed over the size and structure of the relevant TiO2 market that should be considered in assessing competition impacts.

Tronox believes that the appropriate relevant market is the global TiO2 market, and the relevant product market includes TiO2 production from both the chloride and the sulphate processes.

Counter to the FTC’s conclusion, the combined Tronox-Cristal TiO2 business would have “powerful incentives” to run its pigment plants at full capacity, regardless of the activities of competitors, Quinn said.

“We are very confident that this transaction will be completed,” the CEO said.

The deal was a compelling, highly synergistic acquisition that would make the TiO2 industry more competitive, increase TiO2 production and benefit TiO2 customers around the world, he said.

Meanwhile, Tronox will be defending its position in court while continuing to engage with regulators and proceeding with its integration planning for the acquisition, he said.

The FTC, for its part, is arguing in its legal challenge that while TiO2 is manufactured using either a chloride process or a sulphate process, the vast majority of TiO2 sold in the US and Canada is made using the chloride process.

The chloride process produces brighter, more durable coatings than the sulphate process.

The FTC alleges that in the North American market sulphate TiO2 is not a viable substitute for chloride process TiO2.

Major customers for TiO2 in the North American market, principally coatings manufacturers, could not easily or cost-effectively shift away from chloride process TiO2 in favour of sulphate process TiO2, the FTC said.

As such, without divestments or other remedies, the acquisition would allow the merged Tronox-Cristal TiO2 and the other top supplier, Chemours, to control the vast majority of TiO2 sales in the North American market and more than 80% of chloride TiO2 manufacturing capacity in the North American market, according to the FTC.

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