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Awaiting U.S. Tronox-Cristal deal gains European approval

July 6, 2018

Chemicals and minerals company Tronox announced this week the European Commission had conditionally approved its planned $1.7 billion acquisition of the titanium dioxide business of Saudi Arabian chemical and mining firm Cristal, an important endorsement as it tries to close a controversial deal.

Earlier this year, the commission had issued a “Statement of Objections” to the transaction, which has already set off a legal fight with U.S. regulators. But officials at Stamford-based Tronox said they could now meet the European criteria by divesting from “paper-laminate product grade” supplied from its facility in Rotterdam, Netherlands.

“Given our ability to meet the European Commission’s narrow condition, I anticipate we will quickly receive final approval of the proposed remedy,” Jeffry Quinn, president and CEO of Tronox, said in a statement. “It is our intent to proceed immediately to closing the Cristal acquisition as soon as we receive final approval from the European authorities.”

Announced in February 2017, the deal has also gained approvals from regulators in Australia, China, New Zealand, Turkey, South Korea, Colombia and Saudi Arabia.

But the company is still pushing to secure a green light from the U.S. Federal Trade Commission.

Tronox sued the FTC last January, arguing that the agency was resorting to improper tactics to block the acquisition.

Company officials said earlier this year the FTC was relying solely on an administrative process that they said could not conclude before the acquisition agreement expires, a “thinly veiled attempt to run out the clock instead of resolving its concerns about the transaction on their merits.”

FTC officials have declined to comment on the lawsuit.

While Tronox said the FTC is depending only on administrative moves to undo the deal, the FTC did sue the company last December over the deal.

In that complaint, FTC officials have alleged that the acquisition would violate antitrust laws by significantly reducing competition in the North American market for titanium dioxide. In response, Tronox officials have said the FTC’s complaint is based on flawed analysis of the market for titanium dioxide, a white pigment used in products including paint, industrial coatings, plastic and paper.

Tronox and the FTC would likely aim to resolve their dispute by Tronox divesting from some of its assets, said Peter Carstensen, a professor of law emeritus at the University of Wisconsin.

“With new leadership at the FTC, the merits will be reconsidered, as well, but my guess is that such a review will focus primarily on the scope of a remedy — how much to divest,” Carstensen said. “The companies have several distinct facilities, so sale of one or two in order to achieve the global consolidation seems to me the more likely outcome.”

In March, Tronox and Cristal announced they had agreed to extend the end date for closing the deal. They have now enacted the first of three automatic three-month extensions that could follow, until March 31.

Tronox would have to pay a $60 million termination fee if either company walked away from the deal after March 31, should the deal not gain government backing, or if Tronox were to withdraw its offer after Dec. 31, in the event that it did not think it could gain the necessary authorizations.

pschott@scni.com; 203-964-2236; Twitter: @paulschott

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