Industry News

Tronox to Challenge FTC’s Lawsuit Against Proposed Cristal Merger

Published on 2017-12-14. Author : SpecialChem

Tronox has announced that it would vigorously fight a lawsuit filed by the U.S. Federal Trade Commission (FTC) seeking to block the company's proposed acquisition of the titanium dioxide (TiO2) business of Cristal, a privately held global chemical and mining company headquartered in Jeddah, Saudi Arabia.

Erroneous View of the Global TiO2 Market

FTC Lawsuit
Tronox to Challenge FTC’s Lawsuit Against
Proposed Cristal Merger
Tronox maintains that the FTC's complaint is based on an erroneous view of the global TiO2 market and a flawed analysis of the Tronox/Cristal transaction.

"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," said Tronox Chief Executive Officer Jeffry N. Quinn. "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."

Errors in Analysis of the Transaction

In brief, the company maintains that the FTC has made significant errors in its analysis of the transaction, including:

  • The FTC's case is premised on a narrow and flawed view of the size of the TiO2 market. The commission, for example, focuses on TiO2 produced by the chloride process, all but ignoring TiO2 produced via the sulfate process, thereby overlooking nearly half of the available product and miscalculating the market share of individual producers, including overstating the post-transaction Tronox/Cristal. Similarly, the commission's proposed North American market ignores global trade flows and excludes a significant amount of TiO2 imported from Europe and Asia
  • 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.
  • The FTC believes 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 ton

Tronox first filed its Hart-Scott-Rodino notification form on March 14, 2017. The waiting period has been extended several times by agreement of the parties, including after the company had fully complied with the FTC's Second Request. During such time, Tronox fully and completely cooperated with the FTC, diligently responding to all questions and information requests, including producing over one million pages of documents for its review.

Mr. Quinn stated: "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." 

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Source: Tronox
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