Tronox Informed of CMA’s Intention to Launch Investigation into TTI Acquisition

Tronox Holdings plc received a decision today from the British Competition and Markets Authority (CMA) that it intends to open a Phase 2 investigation into Tronox’s proposed acquisition of the TiZir Titanium and Iron (TTI) business from Eramet S.A., as announced on May 14, 2020.

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Tronox (TROX) is one of the world’s leading producers of high-quality titanium products, with nearly 7,000 employees across six continents. The $300 million purchase price of TTI received unanimous approvals from both the Tronox and Eramet boards of directors but was subject to certain consents and customary closing conditions including regulatory approvals.

The CMA and the Federal Trade Commission each launched investigations into the transaction, even though the transaction did not require notification in the United Kingdom or meet pre-merger reporting thresholds in the United States.

Tronox has been cooperative throughout the review process and has been granted the opportunity to offer remedies to the CMA before it reaches a final decision on whether to begin a Phase 2 investigation. (See MGM stock analysis on TipRanks)

Morgan Stanley analyst Vincent Andrews reiterated his Hold rating on TROX three weeks ago and set his price target at $16. This implies downside potential of around 9% from current levels.

Following the release of Tronox’s third quarter results in October, Morgan Stanley asked Tronox CEO, Jeffry Quinn, about EBITDA margins and a possible cost deferral that could come back in 2021. Quinn responded that he believed EBITDA margins were sustainable and that the long-term outlook was good.

Overall, consensus among analysts is a Moderate Buy based on 2 Buys and 1 Hold. The average price target of $14 suggests downside potential of around 4% over the next 12 months.