Cross-Border M&A Team Advises on $3.4 Billion Mining Deal

09.26.11

Reflecting the high volume of African and Australian mining deals, Orrick’s global M&A team is representing Exxaro Resources Ltd., a South African mining company, in the recently announced combination of part of its mining business with Oklahoma City-based pigment producer, Tronox Incorporated. The deal will combine Tronox's proprietary pigment-making technology with Exxaro's mining, mineral separation and smelting mineral sands operations. Exxaro will have a 38.5 percent stake in a newly formed Australian company, "New Tronox," into which Exxaro and Tronox will contribute their respective businesses.

New Tronox has an estimated equity value today of approximately $3.4 billion—making Exxaro's stake worth approximately $1.3 billion.  The transaction will include an SEC-registered exchange offer of shares in New Tronox and is expected to include a listing of New Tronox's shares on the New York Stock Exchange. The parties expect to complete the deal in the first half of 2012.

New Tronox is expected to have 3,500 employees in 16 locations around the world and produce $2 billion in sales and $495 million in EBITDA in the first year of its existence—making it one of the world's largest producers of titanium dioxide pigment. The assets to be contributed to New Tronox by Exxaro include Exxaro's 50 percent interest in the Tiwest Joint Venture in Australia and 74 percent of Exxaro's KZN Sands and Namakwa Sands operations in South Africa, which produce the key titanium-bearing ore feedstock used in the production of titanium dioxide pigment. Exxaro will keep a 26 percent stake in the South African operations to comply with black empowerment ownership requirements under the South African Mining Charter. Following the end of the empowerment period, Exxaro will be able to exchange that stake for a further 3.2 percent interest in New Tronox.

The Orrick team was led by New York corporate partner Peter O'Driscoll and London corporate partner Nell Scott.