FTC Seeks to Block Tronox/Cristal TiO2 Deal

The US Federal Trade Commission (FTC) filed a lawsuit on Dec. 5 seeking to block Tronox’s acquisition of the titanium dioxide (TiO2) business of Saudi Arabia’s Cristal. The US TiO2 producer said it would “vigorously fight” the lawsuit as it believes the FTC’s case is based on an “erroneous view” of the global TiO2 market and a “flawed analysis” of the 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 Jeffry Quinn, CEO of Tronox.

 “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,” he added.

Tronox said the commission has focused on pigment produced by the chloride process, all but ignoring TiO2 produced via the sulfate route, thereby overlooking nearly half of available product and miscalculating the market share of individual producers, including overstating the post-transaction Tronox/Cristal.

Similarly, the US player noted, the commission's view of the North American market ignores global trade flows and excludes a significant amount of TiO2 imported from Europe and Asia.

The FTC has also taken the position that the market operates as an oligopoly and the post-merger Tronox/Cristal will coordinate to restrain production. In fact, said Tronox, the combined company will have powerful incentives to run its pigment plants at full capacity, regardless of the activities of competitors.

While the trade watchdog said it believes the merger partners intend to cut pigment production unilaterally, Tronox asserts that 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 tonne,” the Connecticut-based company said.

"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," Quinn said.

The deal was announced on Feb. 21, 2017, and Tronox first filed its notification form with the FTC on Mar 14, 2017. The waiting period has been extended several times with the agreement of both parties.