Kirkland Aids Tronox-Exxaro Mining Assets Deal

Chemical maker Tronox Inc. said Monday it had agreed to trade the mineral sands operations of South African mining company Exxaro Resources Ltd. in exchange for equity in a new company that Tronox will have majority control over.

The Oklahoma-based maker of chemicals such as titanium dioxide, used in consumer products such as paint and plastic, said it would give Exxaro a 39 percent stake in the new company in exchange for mineral sands assets that will help solidify Tronox's supply of materials.

"Combining this vertically integrated source of ore, along with our existing contracts with other ore producers, ensures Tronox will have the necessary feedstock to support our growth strategies in the years to come," CEO Dennis L. Wanlass said.

The holding company to be formed from the deal, called New Tronox, will leverage Tronox's pigment-making technology with the mining expertise of Exxaro, the statement said. The deal builds on a 20-year joint venture between the two companies called Tiwest, based in Western Australia.

Exxaro's mineral sands operations include its 74 percent stakes in South Africa-based KZN Sands and Namakwa Sands, as well as its 50 percent interest in the joint venture with Tronox.  

New Tronox will be based in Australia and employ about 3,500 people, the statement said. 

Exxaro, which is the world's third-largest producer of mineral sands and South Africa's second-largest producer of coal, will seek to cut costs in its operations through the agreement, the company said. 

"The combined company should realize significant cost benefits and efficiency improvements and it provides a platform for future global growth in pigment production," Exxaro CEO Sipho Nkosi said.

The new venture may also create opportunities for new mining operations in South Africa as demand increases, Nkosi said.

Exxaro's assets are being contributed on a debt-free, cash-free basis, and Tronox, which emerged from Chapter 11 bankruptcy this year, will take on no incremental debt in the deal, the statement said.

New Tronox's board will have nine members and Exxaro will have the right to name three nonexecutive members, it said.

Existing Tronox shareholders will receive about 62 percent of New Tronox's pro forma shares, representing all of the Class A ordinary shares that New Tronox intends to list on the New York Stock Exchange after the deal is closed. The new company also plans to offer investors a dividend at the appropriate time.

The companies hope to complete the transaction by the middle of 2012.

The Kirkland & Ellis LLP attorneys working on the deal include corporate partners Daniel Wolf, Claire Sheng and David Fox, and associate Richard Brand; tax partners Jeffrey Sheffield, Todd Maynes and Gregory Gallagher, and associate Stephen Butler; and debt finance partners Leonard Klingbaum and Christian Nagler. 

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