Titanium Dioxide Industry Faces Asset Reshuffle

- Feb 08, 2019-

Several major titanium dioxide companies in the world are trying to restructure their assets to promote Tronox's $2.4 billion acquisition of Cristal, a major consolidation in the titanium dioxide industry.

The Western countries' titanium dioxide industry has been integrated into five major companies – Como, Teno, Venator, Koster and Kronos Worldwide. According to an investor report released by Venator in June 2018, this accounted for about 54% of global titanium dioxide production capacity.

In order to obtain approval from the US and EU regulators for the acquisition of the Koster titanium dioxide business, Teno is conducting two separate transactions, stripping some assets to the UK's Venator. In the United States, Tenova signed a memorandum of understanding to sell two sets of titanium dioxide units with a total capacity of 245,000 tons per year from Koster's Ashtabula, Ohio, to Venator. Ashtabula is Kostrom's only production base in the United States and the world's largest producer of titanium dioxide.

In the option-style transaction, Teno will have the right to ask Venator to acquire the Ashtabula Titanium Dioxide Factory in case the US releases a preliminary ban on the acquisition of Koster. Teno said that the price of Venator's acquisition of Ashtabula Titanium Dioxide Plant will depend on Teno's progress in the US approval process for the Koster acquisition. Analysts generally agree with Teno's approach. “We believe this is a positive move that has eliminated some of the uncertainty in the deal and the stock,” said Frank Mitch, an analyst at Wells Fargo. “The previous conservative estimate of Teno’s trading revenue was about $800 million. If Teno The $1.1 billion sale of the Ashtabula Titanium Dioxide Plant to Venator will acquire the remaining assets of Koster with approximately 3.5 times the EBITDA. For Teno, this will be a huge victory. The acquisition of most of Koster's assets at such a low valuation to further consolidate its titanium dioxide business. For Venator, the deal is also very cost-effective, as it has acquired a major titanium dioxide asset." Hassan Ahmed, an analyst with Alanbic Global Consulting, said: "We believe that this announcement is a win-win for all parties involved, and the market prefers certainty. This is the completion of Cosmo for the company. The special acquisition provides a clear path."

If Venator successfully purchases Ashtabula assets, then Kronos may also participate in the reshuffle of industry assets. "If the Ashtabula asset transaction is going to take place, Venator will have to go through the antitrust process because it is the 50% equity owner of the Lake Charles Chloride Titanium Factory in the US. If the acquisition is successful, Kronos will be interested in buying Venator in Lake Charles Chlorine. 50% stake in Titanium Dioxide Factory,” said Wells Fargo analysts. In a separate transaction, Teno has signed a Zui final agreement to sell its 8120 paper laminate grade titanium dioxide business to Venator, the amount of the acquisition is not disclosed. The European Commission said in early July that it had approved Teno’s acquisition of Koster on the condition that Teno divested a business. Teno has sold its titanium dioxide business for paper laminates worldwide. The EU said that after this part of the business of Teno, its acquisition agreement with Koster will no longer cause competition concerns.