Cristal buy-out by Tronox in jeopardy as US authorities intervene

By Grimsby Telegraph | Posted: 14 Dec 2017

THE buy-out of one of the South Bank’s largest chemical plants is in jeopardy, and at least facing significant delay, after US authorities objected to the acquisition of Cristal by one of its own companies.

New York Stock Exchange-listed Tronox has agreed a £1.27 billion deal with the Saudi Arabian owner to create the world’s biggest titanium pigment producer. 

An employer of 400 people in Stallingborough, it is one of 11 production plants for the widely used whitening agent involved in a multi-national deal, which was first announced in February. 

Approval has been received from two thirds of the regions in which it will have an impact, but – five days after a now disputed deadline had thought to have passed – a law suit was filed by the Federal Trade Commission to block the transaction.

Tronox has said it will “vigorously fight it,” while Cristal has vowed to explore all options to enable the deal to happen.

In a statement, Tronox chief executive Jeffry N Quinn described the FTC’s complaint as being based on “an erroneous view of the global titanium dioxide market”, and a “flawed analysis of the transaction”.

He said: “It is extremely disappointing that the FTC has taken this unmerited action to try to block a highly synergistic acquisition which will enhance competition in the TiO2 industry and benefit our customers around the world.  

“Our combination with Cristal is an important part of our strategy to build a vertically integrated company that will deliver a low-cost, secure supply of TiO2 pigment to a global customer base.”

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Tronox said the FTC’s take on the size of the market only covers one manufacturing process, overlooking nearly half of the global capacity as well as trade flows, therefore miscalculating the market share of producers.

Claims pigment production would be cut were also dismissed, with Tronox stating “the transaction makes sense only if the combined firm can exploit all potential synergies to safely expand production at a lower cost per tonne”.

Mr 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.”

When the assumed deadline passed Tronox, which has significant raw material mining interests, was understood to be only waiting for anti-trust clearance by the European Commission and the Kingdom of Saudi Arabia.

In the key territory of Australia, where Tronox and Cristal are the only producers of titanium dioxide, the Australian Competition and Consumer Commission decided to not oppose. 

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A spokesperson for Cristal, which would retain a 24 per cent stake in the business, said: “Cristal continues to believe the transaction will be will be good for competition, customers and consumers, and it intends to investigate all options to bring the proposed acquisition to a successful close.”

Tronox does not currently have a UK operation, and on the South Bank of the Humber, more than 300 full-time staff and around 100 regular contractors are employed in what is the largest production plant of its kind in Europe.

First opened in 1953, pre-dating much of the neighbouring industry that was attracted by deep water port access and flat undeveloped land, ownership of the 150,000 tonne capacity plant has changed on several occasions.

The 160-hectare site has operated as Laporte, SCM, Millennium Chemicals and Lyondell.

Cristal, then a smaller competitor in the industry, bought the business 10 years ago, in a deal then worth £612 million. 

Earlier this year Stallingborough's site manager, Rob Sarracini, welcomed the potential the buy-out offered

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