Item 1.01
Entry into Material Definitive Agreement.
On February 21, 2017, Tronox Limited, an Australian public limited company incorporated in the State of Western Australia in the Commonwealth of Australia (the “Company”), The National Titanium Dioxide Company Ltd., a limited company organized under the laws of the Kingdom of Saudi Arabia (“Cristal”), and Cristal Inorganic Chemicals Netherlands Coöperatief W.A., a cooperative organized under the laws of the Netherlands and a wholly owned subsidiary of Cristal (“Seller”), entered into a Transaction Agreement (the “Transaction Agreement”), pursuant to which the Company agreed to acquire Cristal’s titanium dioxide business (the “Business”) for $1.673 billion in cash, subject to a working capital adjustment at closing (the “Cash Consideration”), plus 37,580,000 Class A ordinary shares, par value $0.01 per share, of the Company (the “Consideration Shares”) (the “Transaction”). Following the closing of the Transaction, the Seller will own approximately 24% of the outstanding ordinary shares of the Company. Concurrently with this announcement, the Company announced its intent to begin a process to sell its Alkali business. The Cash Consideration is expected to be funded through proceeds from asset sales, including of the Company’s Alkali business and selected other non-core assets if appropriate, and cash on hand. The Transaction, which has been unanimously approved by the board of directors of the Company (the “Board”), is expected to close before first quarter 2018, subject to regulatory approvals and satisfaction of customary closing conditions. At the closing of the Transaction, the Company and Cristal will enter into a Shareholders Agreement (the “Shareholders Agreement”), the form of which has been agreed to by the parties and is attached as an exhibit to the Transaction Agreement, and the Company will designate two individuals chosen by Cristal to serve as Class A directors of the Company.
Conditions to the Transaction
The completion of the Transaction is subject to certain customary closing conditions, including:
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approval of a majority of the Class A and Class B ordinary shares voting together with respect to the issuance of the Consideration Shares to Cristal;
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approval for the listing of the Consideration Shares on the New York Stock Exchange, subject to official notice of issuance;
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expiration or termination of any waiting periods (and any extensions thereof) under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of certain other required antitrust approvals;
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the receipt of approval under the Foreign Acquisitions and Takeovers Act 1975 (Commonwealth of Australia);
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the Company securing financing sufficient to fund the Cash Consideration; and
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the absence of any judgment, injunction, order or decree (or any suit or action that would reasonably be expected to result in the foregoing) prohibiting, enjoining, or having the effect of making the Transaction illegal.
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Each party’s obligation to consummate the Transaction is also subject to certain additional closing conditions, including (i) the accuracy of the other party’s representations and warranties contained in the Transaction Agreement (subject to certain materiality qualifiers) and (ii) the other party’s compliance in all material respects with its covenants and agreements contained in the Transaction Agreement.
Other Terms of the Transaction
The Transaction Agreement contains customary representations, warranties and covenants by each party that are subject, in some cases, to specified exceptions and qualifications contained in the Transaction Agreement. The representations and warranties in the Transaction Agreement are the product of negotiations between the parties to the Transaction Agreement and are made to, and solely for the benefit of, the party to whom such representations and warranties are made, in each case as of specified dates. Such representations and warranties may have been made for the purpose of allocating contractual risk between the parties to the Transaction Agreement instead of establishing these matters as facts, may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors, and may not be relied upon by any other person. The covenants include, among others, the following: (i) the Company’s obligation to operate its business in all material respects in the ordinary course between execution of the Transaction Agreement and the closing of the Transaction; (ii) Cristal’s obligation to operate the Business in all material respects in the ordinary course between the execution of the Transaction Agreement and the closing of the Transaction; (iii) Cristal’s agreement to be subject to certain exclusivity obligations; (iv) Cristal’s agreement not to compete with the Business (subject to certain exceptions) for a period of two years after the closing of the Transaction; and (v) certain non-solicit obligations applicable to both the Company and Cristal for a period of two years after the closing of the Transaction.
Each of the parties is required to use its reasonable best efforts to consummate the Transaction, including by making a filing under the U.S. Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and obtaining all consents and authorizations from governmental entities necessary to complete the Transaction. Notwithstanding the foregoing, neither party is required to agree to the divestiture, sale or disposition of assets of the Company or Cristal or the Business or take any actions that could limit the Company’s, Cristal’s or the Business’s freedom of action with respect to their respective assets or assets of the Business if such actions would be detrimental to Cristal and its subsidiaries or the Company and its subsidiaries, as applicable, taken as a whole.
The Company intends to fund the Cash Consideration with a combination of proceeds from asset sales, including of the Company’s Alkali business and selected other non-core assets if appropriate, and cash on hand. The Transaction is conditioned on the Company obtaining financing sufficient to fund the Cash Consideration.
The Transaction Agreement contains customary termination provisions in favor of both parties, including a right to terminate the Transaction Agreement if the closing of the Transaction has not occurred on or before May 21, 2018 (the “Termination Date”). The Transaction Agreement provides that the Company must pay to Cristal a termination fee of $100 million if all conditions to closing, other than the financing condition, have been satisfied and the Transaction Agreement is terminated because closing of the Transaction has not occurred by the Termination Date. The Transaction Agreement further provides that the Company shall reimburse Cristal for certain expenses not to exceed $15 million if the Transaction Agreement is terminated due to a failure to obtain the required shareholder vote.
Both the Company and Cristal have agreed, following the closing, to indemnify the other party for losses arising from certain breaches of the Transaction Agreement and for certain other liabilities, subject to certain limitations.
Simultaneous with the closing of the Transaction, the parties will enter into certain ancillary agreements, including a transition services agreement. Subject to negotiations with Cristal, the Company has the intention to acquire Cristal’s 500 MMT slag production facility in Saudi Arabia.
The foregoing description of the Transaction Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Transaction Agreement, which is filed herewith as Exhibit 2.1 and is incorporated herein by reference.
Shareholders Agreement
Pursuant to the Transaction Agreement, the Company, Cristal, the Seller and the three shareholders of Cristal (the “Shareholders”) have agreed to enter into a Shareholders Agreement. Pursuant to the Shareholders Agreement, as long as the Shareholders, collectively, beneficially own at least 28,185,000 or more Class A Shares, they will have the right to designate for nomination two Class A directors of the Board and, as long as they beneficially own at least 15,568,333 Class A Shares but less than 28,185,000 Class A Shares, they will have the right to designate for nomination one Class A director of the Board. The Shareholders Agreement also will provide that as long as the Shareholders own at least 11,743,750 Class A Shares, they will be granted certain preemptive rights.
The Company has agreed to file promptly after the closing of the Transaction a registration statement covering approximately four percent of the then-outstanding ordinary shares of the Company, which may be sold as soon as such registration statement is effective. Other than with respect to those Consideration Shares, the Shareholders Agreement will include restrictions on the Seller’s ability to transfer any other of its Class A Shares for a period of three years after the closing of the Transaction other than to certain permitted transferees after the later of eighteen months and the resolution of all indemnification claims under the Transaction Agreement. The Shareholders Agreement will also contain certain demand and piggy-back registration rights, which commence after the three-year transfer restriction period expires. Finally, the majority of the Shareholders will also agree to certain non-competition obligations for two years following the closing of the Transaction.
The foregoing description of the Shareholders Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the form of Shareholders Agreement that appears as Exhibit A to the Transaction Agreement, which is filed as Exhibit 2.1 and is incorporated herein by reference.