US files antitrust challenge to block pigment-maker deal

Cristal is owned by Saudi's Tasnee and Kuwait-based Gulf Investment
The US Federal Trade Commission challenged a proposed deal between two companies that supply a white pigment used in paints and plastics, saying that a tie-up would harm competition.
By Bloomberg
Wed 06 Dec 2017 08:32 AM

The US Federal Trade Commission challenged a proposed deal between two companies that supply a white pigment used in paints and plastics, saying that a tie-up would harm competition.

The agency filed an administrative complaint Tuesday seeking to block Tronox Ltd. from completing a $1.6 billion purchase of the titanium-dioxide business of closely held Cristal, saying that the acquisition would give Tronox too much market power. The FTC said in a statement that it also gave staff the go-ahead to make filings in federal court to keep the companies from closing the deal, pending an administrative trial.

Bud Grebey, a Tronox spokesman, said the company was reviewing the FTC’s complaint and declined to immediately comment. Tronox fell 9.9 percent to $23 at 6:17 p.m. in New York after the close of regular trading.

On Monday, the company said the antitrust review period had expired with no action and it believed it was free "to proceed toward completion of the transaction," according to a statement by Tronox Chief Executive Officer Jeffry Quinn.

The deal to buy the titanium-dioxide business of closely held Cristal would allow Tronox to leapfrog Chemours Co. as the world’s biggest producer of the white pigment also known by its chemical formula, TiO2.

Triple Production

The acquisition would enable Tronox to double per-share earnings and triple its production of the substance, the company has said. The deal would combine some of the largest U.S. TiO2 plants that use the chloride process.

The FTC said that without a remedy, which would involve the sale of assets to a third party, the deal would allow the combined firm and its rival Chemours "to control the vast majority of chloride titanium dioxide sales in the North American market" and more than 80 percent of the manufacturing capacity of the product.

Adding Cristal’s eight factories would give Tronox a total of 11 plants producing 1.3 million metric tons of pigment a year, or about 15 percent of the global market, the company said when the deal was announced in February.

Third Largest

Tronox’s plant in Hamilton, Mississippi, is the third largest chloride-process TiO2 factory in the world and can produce as much as 225,000 metric tons of the white pigment annually, according to the company’s website.

Cristal’s plant in Ashtabula, Ohio, features two chloride-process plants and is the company’s largest TiO2 facility, accounting for 30 percent of total production, according to the company’s website.

Cristal is owned 79 percent by Saudi Arabia’s National Industrialisation Co., known as Tasnee; 20 percent by Kuwait-based Gulf Investment; and 1 percent by Tasnee vice chairman Talal Al-Shair.

If the deal is allowed to go forward unchanged, Tronox would gain six mines from the Cristal transaction and would be 85 percent integrated into titanium raw materials.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.