National Industrialization Co. — M&A Activity 2017

Feb 21, 2017

TASNEE announces that its subsidiary Cristal has entered into a conditioned transaction agreement to sell to Tronox its domestic and international titanium dioxide business for cash and newly shares

2060 · 21/02/2017 16:58:58 · Announcement #45671 · View on Saudi Exchange

TASNEE announces that its subsidiary Cristal has entered into a conditioned transaction agreement to sell to Tronox its domestic and international titanium dioxide business for cash and newly shares

National Industrialization Co. (Tasnee) today (21 February 2017) announced that its 79% owned subsidiary National Titanium Dioxide Company a limited liability company holding commercial registration number 40300062296 (Cristal) has entered into a conditioned transaction agreement on 24 Jumada Al-Awwal 1438H corresponding to 21 February 2017G to sell to Tronox Limited A.C.N. 153 348 111 a public limited company registered under the laws of the State of Western Australia and listed on the New York stock exchange (Tronox) its domestic and international titanium dioxide (TiO2) business (including but not limited to the sale of (a) all international subsidiaries of Cristal Arabia, (b) assets (including the Yanbu plant of Cristal) and liabilities relevant to such business and (c) contracts, intellectual property and goodwill in respect of such business (the Cristal Assets) in return for US$ 1.673 bln (SR 6.274 bln) cash and 37,580,000 of newly issued Class A shares in Tronox (which represents approximately 24% of the shareholding in Tronox at closing). Closing of the deal which is expected to occur within 15 months from the date hereof is subject to the satisfaction of certain condition precedents, including amongst other things governmental and regulatory approvals in the relevant jurisdictions and the conclusion of a Cristal reorganisation.

This transaction enables Cristal and Tronox to position the combined businesses for long term success in the titanium dioxide (TiO2) industry. This also allows Tasnee to focus on its petrochemical assets downstream business and other strategic business development opportunities while substantially deleveraging its balance sheet.

Tom Casey will remain chairman and chief executive officer of the combined business. The size of the company board of directors will remain unchanged at nine members. Cristal will have two of the nine existing board seats. The new company corporate offices will remain in Stamford, Connecticut, USA and it will continue as a public company listed on the New York Stock Exchange.

The combined business shall result in creating of a robuts, highly integrated and geographically diversified player in the titanium dioxide industry,globally with expected run rate synergies of more than US$ 100 mln (SR 375 mln) in year 1 and more than US$ 200 mln (SR 750 mln) in year 3 from the combination of Cristal and Tronox businesses

Cristal operates eight titanium dioxide (TiO2) manufacturing plants in the USA, Brazil, United Kingdom France Saudi Arabia, China and Australia. Cristal also operates mines in Brazil and Australia and has a research and development center in the USA. Cristal also operates a titanium metal powder plant in the USA.

Tronox operates three titanium dioxide (TiO2) pigment plants in the USA, The Netherlands and Australia it operates mines in South Africa and Australia, it has a research and development center in the USA and it has an electrolyte and specialty chemicals division in the USA.

Upon closing of the transaction, Tasnee will deconsolidate the Cristal Assets from its consolidated financial statements and account for its interest in Tronox as an investment.

The book value of assets which shall be sold by Cristal under this transaction amounts to approx. SR 10 bln (US$ 2.685 bln) at December 31, 2016.

As a result of this transaction, using the cash consideration, Cristal shall fully repay its bank debt of SR 6.274 bln (US$ 1.673 bln) outstanding in the Kingdom of Saudi Arabia. This would result in the reduction of gross debt of Tasnee by the same amount and would significantly enhance the credit metrics of Tasnee. The transaction will significantly deleverage Tasnee consolidated balance sheet from 6.0x to 4.5x pro forma December 2016 post transaction.

Any potential impact resulting from this divesture including foreign currency translation differences is subject to change due to movement in the share price of Tronox, changes in foreign currency rates, among other items. The actual impact on net income and shareholders equity shall be determined at the date of closing of this transaction.

HSBC Saudi Arabia and Perella Weinberg Partners are acting as financial advisors. Clifford Chance and Abuhimed AlSheikh AlHagbani Law Firm (in co-operation with Clifford Chance) are acting as legal advisors.

Tasnee will announce any material developments pertaining to the Transaction in due course.

The Capital Market Authority and Saudi Exchange take no responsibility for the contents of this disclosure, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this disclosure, and the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.