Tronox signs definitive agreement to sell alkali chemicals business
Thursday, Aug 03, 2017
Tronox Limited (NYSE:TROX) announced today that it has signed a definitive agreement to sell its Alkali Chemicals business to Genesis Energy, L.P. (NYSE:GEL), a diversified midstream energy master limited partnership headquartered in Houston, Texas, for $1.325 billion in cash.  The transaction is expected to close in the second half of 2017, subject to customary regulatory approvals and closing conditions.

Alkali Chemicals is the world's largest producer of natural soda ash with its mining and processing facilities located in Green River, Wyo.  Alkali's products are used in glass manufacturing, detergents, baked goods, animal nutrition supplements, pharmaceuticals, and other essential products.

Peter Johnston, chief executive officer of Tronox, said:  "We were pleased to have received significant interest in our Alkali business from multiple potential buyers. Genesis' proposal was the most compelling for its overall value, with its combination of price, favorable contract terms, speed to closing, committed financing, and expected ease of regulatory approvals.  These considerations, in aggregate, provided the highest level of certainty to Tronox.  We anticipate being able to close this transaction prior to our planned closing of the Cristal TiO2 acquisition.

"Alkali Chemicals has consistently delivered strong operational and financial performance.  The caliber of the Alkali workforce and their commitment to safe, high-quality production are unmatched in the natural soda ash industry.  I thank the leadership team and all Alkali employees for their contributions to Tronox," said Johnston.

The sale of Alkali Chemicals is the next step in positioning Tronox as the global leader in TiO2.  The proceeds will be used to fund the majority portion of the cash consideration for the Cristal TiO2 acquisition, which is expected to close by the first quarter of 2018.  As an integral part of this strategy, the company announced its intention to refinance a portion of its capital structure.  Net debt leverage of approximately 4.5x trailing twelve months pro forma EBITDA before synergies is expected at the closing of the Cristal transaction.

Credit Suisse is acting as financial advisor to Tronox for both the Cristal and Alkali transactions and Kirkland & Ellis LLP and Willkie Farr & Gallagher LLP are Tronox's legal advisors.

Second Quarter 2017 Selected Preliminary Financial Results

"We are also very pleased to report strong preliminary results for the second quarter of 2017 with revenue up 16 percent over prior year, adjusted EBITDA of $140 million and adjusted EPS of $0.09," said Johnston.

  • Revenue of $622 million up 16 percent versus prior year; TiO2 revenue up 26 percent
  • GAAP diluted EPS of $0.02; adjusted EPS of $0.09 (Non-GAAP)
  • Income from operations of $55 million; adjusted EBITDA of $140 million up 97 percent versus prior year (Non-GAAP)
  • TiO2 income from operations of $61 million up more than seven-fold and adjusted EBITDA of $123 million up 116 percent versus prior year; adjusted EBITDA margin of 29 percent
  • TiO2 pigment selling prices 7 percent above prior quarter and 18 percent above prior-year quarter
  • Alkali income from operations of $23 million up 92 percent and adjusted EBITDA of $41 million up 41 percent versus prior year
  • Loss from sale related to the Alkali transaction is expected to be approximately $200 million in the second half of the year
Johnston concluded: "We see the momentum in our TiO2 business continuing across the balance of this year and expect to benefit from additional pigment selling price increases, favorable market conditions for titanium feedstock and co-products, and continued strong cost performance.  We are confident that 2017 will be a year of strong performance and that 2018 will be a transformational one for Tronox.  Cristal TiO2 integration planning is proceeding on schedule so that we can from day one begin to realize the substantial value creation enabled by our combination."

Tronox plans to report its full second quarter 2017 financial results on the schedule previously announced with a press release issued on Tuesday, August 8, 2017, after the market close and a webcast conference call held on Wednesday, August 9, 2017, at 8:30 a.m. ET (New York).  Call-in details are provided later in this release.

Tronox has not yet finalized its financial statement close process for the quarter ended June 30, 2017.  As a result, the information in this statement is preliminary and based upon information available to the Company as of the date of the statement.  In connection with the finalization process, Tronox may identify items that would require adjustments to its preliminary financial results announced herein. The company's financial results could be different, and those differences could be material. The preliminary financial results have been prepared by and are the responsibility of Tronox management. Our auditors, PricewaterhouseCoopers LLP, have not audited the accompanying preliminary financial data.

Capital Structure Refinancing

Tronox also announced its intent to refinance a portion of its capital structure with the expectation of lowering its overall cost of debt while extending the portfolio's weighted average years to maturity.  The company expects to improve its mix of secured and unsecured debt and achieve more favorable covenants.  The company also expects the new debt will provide additional pay down flexibility as the combination of Tronox's and Cristal's TiO2 businesses is expected to generate substantial additional free cash flow.  Net debt leverage of approximately 4.5x trailing twelve months pro forma EBITDA before synergies is expected at the closing of the Cristal transaction.  Further decreases in net leverage are anticipated during the period following the Cristal closing.

The Company anticipates completing the refinancing by mid-October.  The proposed refinancing is subject to market conditions, and there can be no assurances that the proposed refinancing will be completed.

About Tronox

Tronox Limited operates two vertically integrated mining and inorganic chemical businesses. Tronox TiO2 mines and processes titanium ore, zircon and other minerals, and manufactures titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and other everyday products. Tronox Alkali mines trona ore and manufactures natural soda ash, sodium bicarbonate, caustic soda, and other compounds which are used in the production of glass, detergents, baked goods, animal nutrition supplements, pharmaceuticals, and other essential products.  

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