Tronox, Cristal Merger Wins Conditional EU Approval

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By Eleanor Tyler

Tronox Ltd.'s $1.67 billion bid for Cristal’s titanium dioxide business won approval from European Union competition authorities on Tronox’s pledge to divest assets related to a specific chemical for paper laminate.

The EU Competition Commission announced July 4 that it had cleared the deal after an in-depth investigation found potential competition problems in a single market, chloride-based titanium dioxide pigment for use in paper laminate. Tronox’s offer to sell its global business in titanium dioxide pigment for paper laminate to an experienced manufacturer eased the EU’s only concerns about the deal.

Titanium dioxide is widely used as white pigment in products ranging from paint and sunscreen to ceramic glazes and inks.

Tronox’s purchase of Cristal (also known as The National Titanium Dioxide Co. Ltd.) puts it ahead of Chemours Co. as “the world’s largest and most highly integrated TiO2 pigment producer with assets and operations on six continents,” according to the companies’ Feb. 21, 2017, announcement of the deal.

Tronox said at the time that the combined company will operate 11 titanium dioxide plants in eight countries “with a total capacity of 1.3 million metric tons per annum and will have titanium feedstock operations in three countries with a total capacity of 1.5 million metric tons per annum.”

The EU looked into whether the deal would have anticompetitive impacts in the pigment and feedstock markets and also examined potential effects in the market for zircon, which is used in the production of tiles, ceramics, and fire bricks. Authorities concluded that all three markets are competitive and customers could look to many other sources if the combined entity tried to raise prices.

Other Fires

The deal can’t close yet because it faces significant hurdles to clearance in the U.S.

The Federal Trade Commission filed a complaint against the merger in December 2017. The FTC alleged that the deal would reduce competition in chloride process titanium dioxide in the U.S. and Canada by increasing “risk of coordinated action” among the remaining few competitors and by raising the risk that Tronox could unilaterally withhold supply to boost prices.

The deal is presumptively illegal because Tronox and Cristal are two of the three biggest producers in the U.S. and Canada and, combined with the third, Chemours, would concentrate far too much market power in a duopoly if Tronox and Cristal are allowed to merge, according to the FTC.

The risk of coordination is not an abstract concern. The world’s largest titanium dioxide makers faced a long-running class action in the U.S. alleging they operated as a cartel raising prices in parallel at least 17 times between 2005 and 2010.

Administrative Law Judge Michael Chappell held a multiweek bench trial in the case in May and June. The parties are due to file any post-trial briefs by Aug. 7.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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