Tronox seeks permission
On December 4, Tronox (TROX) announced that it filed a motion with the Honorable D. Michael Chappell, the chief administrative law judge, seeking permission to present the proposed divestitures to the FTC (Federal Trade Commission). Tronox’s acquisition of Cristal is pending due to approval from the FTC. If Tronox gets approval from the administrative law judge, it would be able to engage in direct discussions with FTC commissioners.
Tronox has proposed to divest its two Ashtabula titanium dioxide plants to INEOS. The divestiture is valued at $700 million.
Jeffrey N. Quinn, Tronox’s president and CEO, said, “INEOS is an experienced and sophisticated purchaser of chemical operating assets, with dozens of successful acquisitions in the last two decades, particularly in chemical carve-out acquisitions. I believe this ideally positions the Ashtabula complex and INEOS to flourish as a stable and competitive new entrant into the TiO2 market.”
Stock price update
The volatile market and uncertainty about the acquisition resulted in a significant decline. Tronox stock fell 31% and closed at $7.3 for the week ending December 7. The decrease in the stock price caused Tronox to trade 46.6% below its 100-day moving average of $13.68, which indicates a downward trend in the stock. On a year-to-date basis, the stock has declined 64.6%. However, analysts have recommended a target price of $17.2, which implies a return potential of 135% over the closing price on December 7. Tronox’s relative strength index of 21 indicates that the stock has temporarily moved into an oversold position. There could be a possible bounceback from these levels.
Investors could hold Tronox indirectly by investing in the VanEck Vectors Rare Earth Strategic Metals ETF (REMX), which has invested 2.8% of its portfolio in Tronox as of December 7.