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Chemical Companies: Updates for the Week Ending August 4

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Chemical Companies: Updates for the Week Ending August 4 PART 1 OF 4

Tronox Will Sell Its Alkali Chemicals Business

Tronox to divest its alkali chemicals business

On August 2, 2017, Tronox (TROX) announced that it entered into a definitive agreement with Genesis Energy LP (GEL) to sell its alkali chemicals business. The sale will allow Tronox to concentrate on its Tio2 (titanium dioxide) business. Tronox acquired the Tio2 business from Cristal for ~$1.67 billion. The sale is in connection to finance the acquisition of Cristal’s Tio2 business.

Tronox Will Sell Its Alkali Chemicals Business

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The deal is expected to fetch Tronox $1.325 billion, which will be paid in cash by Genesis Energy. The deal is expected to close in 2H17. In 1Q17, Tronox’s alkali chemicals business reported revenue of $191 million. Tronox hasn’t announced its 2Q17 earnings.

Tronox’s CEO, Peter Johnston, said, “We were pleased to have received significant interest in our Alkali business from multiple potential buyers. Genesis’ proposal was the most compelling for its overall value, with its combination of price, favorable contract terms, speed to closing, committed financing, and expected ease of regulatory approvals.  These considerations, in aggregate, provided the highest level of certainty to Tronox.  We anticipate being able to close this transaction prior to our planned closing of the Cristal TiO2 acquisition.”

Tronox stock gained traction last week

Tronox rose 2.5% for the week ending August 4 and closed at $19.90. The strong gains pushed the stock to trade 19.30% above the 100-day moving average price of $16.67. On a year-to-date basis, the stock has returned 93.0%. Its peers Chemours (CC), Albemarle (ALB), and FMC (FMC) have returned 123%, 39%, and 49.10%, respectively. Tronox’s relative strength index of 72 indicates that the stock has temporarily moved to an “overbought” situation. An RSI of 70 and above indicates that the stock is overbought.

Investors can hold Tronox indirectly by investing in the Rare Earth/Strategic Metals ETF (REMX). REMX has invested 6.40% of its portfolio in Tronox.

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