Tasnee subsidiary agrees to sell 90% stake to Tronox

National Industrialization Co.’s (Tasnee) subsidiary Advanced Metal Industries Cluster Company Limited (AMIC) signed an option agreement with NYSE-listed Tronox Ltd to sell 90 percent ownership in its titanium slag smelter facility (slagger) in Jazan City, the company said in a statement to Tadawul on Thursday.

The execution of the option agreement follows a technical services agreement between AMIC and Tronox, whereby Tronox will provide technical assistance to AMIC to facilitate start-up of the slagger.

The slagger has a capacity to supply up to 500kt of TiO2 slag and 220kt of pig iron, located for primary and downstream industries in the Kingdom.

As part of the deal, AMIC will create a special purpose vehicle (SPV) incorporated in the Kingdom. Upon reaching the sustained operations of the slagger as defined within the option agreement, Tronox will acquire a 90 percent ownership of the SPV.

Tronox will take over AMIC's external debt of $322 million through ownership in the SPV, another $125 million loan, a working capital adjustment and an adjustment to compensate AMIC for 10 percent of the outstanding liabilities of the SPV, as part of the total consideration.

Meanwhile, AMIC and Tronox also agreed to enter into a shareholders agreement relating to their respective rights and obligations as shareholders of the SPV.

"The strategic intent of the option agreement and technical Services agreement is to globally enhance vertical integration and capture significant synergies between TiO2 pigment production and TiO2 feedstock production after the closing of Tronox's merger with Cristal for the benefit of Tasnee shareholders," said Mutlaq H. Al-Morished, chief executive, Tasnee.

AMIC is equally-owned by Tasnee and National Titanium Dioxide Ltd. (Cristal). Tasnee owns 79 percent of Cristal.