The new company, which for the moment is being called "New Tronox" and is expected to trade on the New York Stock Exchange, will have an estimated value of 27.8 billion rand ($3.4 billion), making Exxaro's stake worth R10.7 billion rand.
Tronox said the deal brings together its proprietary pigment-making technology with Exxaro's mining, mineral separation and smelting mineral sands operations and that the combined company will benefit from the assurance of feedstock supply and have a strong platform for future growth, including either expansion of existing facilities or a new pigment plant. Tronox is already Exxaro's joint venture partner at Tiwest in Australia.
The assets include Exxaro's 50% interest in the Tiwest joint venture and 74% of Exxaro's KZN Sands and Namakwa Sands operations in South Africa, which produce the key titanium-bearing ore feedstock used in the production of titanium dioxide pigment. Exxaro said it will keep a 26% stake in the South African operations to comply with black ownership requirements under the South African Mining Charter, but if those rules are lifted, it will exchange the stake for 3.2% of the New Tronox.
The combined entity will have 3,500 employees in 16 locations around the world and together produced $2 billion in sales and $495 million in Ebitda over the past year. Tronox expects operational synergies of $30 million per year primarily through the rationalization of administrative and ore logistics costs and ore in-use optimization.
Tronox's production capacity will increase to 465,000 tonnes of titanium dioxide pigment and will be backward integrated with production capacity of 95,000 tonnes of natural rutile, 380,000 tonnes of slag and 220,000 tonnes of synthetic rutile, all of which can be used to produce titanium dioxide. Tronox also will have the capacity to produce 265,000 tonnes of zircon, which goes into ceramics, and 220,000 tonnes of pig iron, which can be worked into wrought iron and steel.
The transaction is expected to close in the first half of next year if it clears Tronox shareholders and regulators. Tronox has obtained committed financing from Goldman Sachs Bank USA to refinance its senior term loan debt at closing.
There will be nine directors on the new company's board, and Exxaro will have the right to name three. Tom Casey will remain chairman and Dennis Wanlass CEO with members of Exxaro's senior management joining New Tronox's leadership team.
Tronox, previously troubled with environmental liabilities at its parent company, emerged from Chapter 11 in February with a total enterprise value of $1.1 billion.
Tronox used Moelis & Co.'s David Faris, Anton Sahazizian and Nicholas Kournetas and Goldman, Sachs & Co.'s John Vaske and Sameer Ralhan for financial advice. Its legal advisers included Kirkland & Ellis LLP's Daniel Wolf, Claire Sheng, David Fox, Richard Brand, Jeffrey Sheffield, Todd Maynes, Gregory Gallagher, Stephen Butler, Leonard Klingbaum and Christian Nagler; Werksmans Attorneys' Wildu du Plessis, Shirley Fodor and Morné van der Merwe; and Blake Dawson's Marie McDonald, Kylie Lane, Rupert Lewi and Geoffrey Mann. Also assisting were Grant Thornton LLP's Claudine Cohen and Tom Freeman, TZ Minerals International's Gavin Diener, Coffey International Ltd.'s Brendan Botha and Environmental Resources Management Ltd.'s C. Louise Pearce, Leslie Nicholas and Jim Perazzo.
Exxaro used J.P. Morgan Chase & Co.'s James Mutugi and Grant Tidbury for financial advice. Its lawyers included Norton Rose LLP's Kevin Cron, CLS Attorneys' Thinus Jacbosz, Orrick Herrington & Sutcliffe LLP's Peter O'Driscoll, Nell Scott, Lorraine McGowen, Vincent Casey and Alyssa Englund, and Freehills' Daniel Blue, Jonathan Li and Paul Tempone.
CamberView Partners LLC, advising public companies on shareholder activism, hired Allie Monaco Rutherford as a principal. For other updates launch today's Movers & shakers slideshow.
Dodd-Frank, the conventional wisdom goes, will prevent a repeat of the events of the 2008 just at the Securities Act of 1933 and the Securities Exchange Act of 1934 made U.S. securities markets safe for individual investors. Paul Mahoney offers another view of the similarity between Dodd-Frank and the New Deal legislation in his new book Wasting a Crisis: Why Securities Regulation Fails. More video