Antitrust Law Daily Divestiture resolves FTC challenge to $1.67B merger of Tronox and Cristal
Thursday, April 11, 2019

Divestiture resolves FTC challenge to $1.67B merger of Tronox and Cristal

By Jody Coultas, J.D.

Tronox Limited and Cristal agree to divest Cristal’s North American titanium dioxide assets.

After signaling progress in settling the case in February, the FTC has resolved a challenge to the merger of the two largest suppliers of white pigment chloride process titanium dioxide. Tronox Limited and The National Titanium Dioxide Company Limited (Cristal) agreed to divest Cristal’s North American titanium dioxide assets in order to end the dispute with the FTC, which began in December 2017. The FTC agreed that the proposed divestures will preserve competition in the market for chloride process titanium dioxide (TiO2), the agency announced on April 10 (In the Matter of Tronox Ltd., FTC Dkt. 9377).

Tronox and Cristal are two of the top three producers of chloride process titanium dioxide, a white pigment used in a wide variety of products including paint, industrial coatings, plastic, and paper, in North America. The FTC objected to Tronox’s proposed acquisition of Cristal—for $1.67 billion and a 24 percent stake in the combined entity—for its potential to significantly reduce competition and increase the likelihood of successful coordination among the remaining four suppliers.

The FTC filed an administrative complaint in December 2017. The federal district court in Washington, D.C. granted the FTC a preliminary injunction preventing Tronox Limited and Cristal from merging their TiO2 business. The court explained that the proposed transaction was likely to substantially lessen competition in the North American chloride-process titanium dioxide market and that a preliminary injunction was in the public interest.

In December 2018, FTC Chief Administrative Law Judge D. Michael Chappell issued an initial decision upholding the FTC allegations. The ALJ concluded that the FTC met its prima faciecase by establishing a presumption of liability showing that the acquisition will lead to undue concentration in the TiO2 market in North America and a likelihood of coordinated, anticompetitive effects.

Under the settlement, Tronox and Cristal will sell the divested assets to Ineos, a multinational chemical manufacturer, no later than 30 days from the close of the acquisition.

Under the proposed order, Tronox and Cristal would be required to: (1) divest to Ineos two chloride process TiO2 manufacturing plants and related assets in Ashtabula, Ohio, and transfer or license all intellectual property rights necessary to manufacture chloride process TiO2 products at Ashtabula; (2) divest to Ineos research and development equipment and administrative support functions at the Baltimore Administrative and Technical Center or BATC in greater Baltimore; (3) provide Ineos the ability to hire relevant Cristal personnel located in North America, including all employees at the Ashtabula plants and almost all of the support personnel located at BATC; (4) provide Ineos the option, exercisable during a 10-year period after closing, to acquire rights to use the licensed intellectual property to produce chloride process TiO2 products at a new manufacturing facility outside North America; and (5) transfer or assign to Ineos customer contracts related to Cristal’s chloride process TiO2 sales in North America.

Companies: Tronox Ltd.; National Titanium Dioxide Company Ltd.

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