Tronox Holdings plc · NYSE:TROX
Tronox — Merger or Acquisition (October 2011)
28 slides from Tronox's merger presentation, Oct 6, 2011
Slide 1: Exxaro Mineral Sands Acquisition Investor Presentation
EXXARO MINERAL SANDS ACQUISITION Investor Presentation October 6, 2011
Slide 2: Forward-Looking Statements
Forward-Looking Statements FORWARD LOOKING STATEMENTS This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “anticipate,” “estimate,”
Slide 3: Tronox and Exxaro Mineral Sands Combination
Tronox and Exxaro Mineral Sands Combination Tronox and its Board of Directors considered various strategic alternatives to maximize shareholder value Combination of Tronox and Exxaro Mineral Sands provides (i) the most compelling way to maximize shareholder value and (ii) a higher value route to liq
Slide 4: Agenda
Agenda Strategic Rationale of the Transaction Financial Rationale of the Transaction Detailed Review of Transaction Terms 4
Slide 5: Compelling Strategic Rationale
Compelling Strategic Rationale Combining a leading pigment producer and a leading ore supplier to create security of raw material and optimal supply of feedstock Security of ore supply in near-term Raw material security important in (2012) and longer-term current economic conditions; even more cri
Slide 6: Security of Ore Supply
Security of Ore Supply Global Supply / Demand for Titanium Feedstock (1) 12,000 000’ TiO2 units Existing production of ~6,000,000 10,000 TiO2 units per annum includes 8,000 projects currently in operation plus 6,000 ~440,000 TiO2 units from Fairbreeze 4,000 and the Moma mine expansion in 2,000 '06E
Slide 7: Security of Ore Supply (continued)
Security of Ore Supply (continued) Current market for titanium feedstocks is very tight, especially for high-grade feedstocks Ore supply deficits are expected to grow Depletion of legacy ore bodies and lack of investment High risk and long lead time (typically 5 – 7 years) in starting new projects O
Slide 8: Security of Supply
Security of Supply Stand-Alone Tronox Pro Forma Tronox 000' tonnes ore 000' tonnes ore 601 Third-party contracts and spot market purchases required to f ill 512 current production requirements KZN Sands (12+ yr LoM) 220 83 429 Tiwest JV (Merge) 83 Tiwest JV 83 Namakwa 99 Sands 160 99 Botlek (20+ yr
Slide 9: Solid Platform for Future Growth – TiO2
Solid Platform for Future Growth – TiO2 TiO2 - Supply/Demand (1) Global TiO2 pigment market continues to 10,000 000’ TiO2 units remain tight with major producers operating near full capacity (>95%) 8,000 The projected expansion of TiO2 pigment 6,000 supply reflects announced but not built production
Slide 10: Solid Platform for Future Growth – Zircon
Solid Platform for Future Growth – Zircon Zircon - Supply/Demand (1) Zircon is a mineral often produced as a co- product of TiO2 minerals primarily in Australia 2,250 000' tonnes and South Africa 2,000 1,750 Global Zircon demand continues to stay significantly higher than supply 1,500 1,250 Expected
Slide 11: Meaningful Operational Synergies
Meaningful Operational Synergies Near -Term Medium-Term Consolidation of TiWest JV Optimization of ore in-use Elimination of duplicate services High grade TiO2 feedstocks Rationalization of SG&A Cheaper slag fines Marketing Significant cost advantages from Supply chain optimization Lower chlorine &
Slide 12: Compelling Financial Rationale
Compelling Financial Rationale Multiple levers to drive significant long-term shareholder value in different economic conditions Acquisition of strategic mining assets at attractive valuations Significant free cash flow generation – Estimated pro forma levered free cash flow of ~$700 million in
Slide 13: New Tronox Adjusted EBITDA Profile
New Tronox Adjusted EBITDA Profile Pro Forma New Tronox ex. Synergies (1) Pro Forma New Tronox (US$ in millions) Electrolytics Zircon, Pig Iron, $1,750 - $2,000 and Other $1,400 - $1,500 85% $1,000+ TiO2 Pigments $770 - $800 Illustrative Adjusted EBITDA Contribution $497 LTM 6/30/2011 2011E 2012E Pe
Slide 14: Attractive Implied Valuations
Attractive Implied Valuations Tronox acquired strategic mining assets at attractive valuations Pro Forma New Tronox Implied Valuation (US$ in millions except per share data) (1) Current Tronox Share Price $ 92.00 Diluted Shares Outstanding (2) 26.9 Implied Equity Value $ 2,479 (3) (+) New Tronox Net
Slide 15: Capital Structure and Cash Flow Deployment
Capital Structure and Cash Flow Deployment Conservative pro forma capital structure Tronox Capitalization (June 2011) with significant financial flexibility (US$ in millions) Amount Cash $ 87 No incremental debt incurred in Total Debt acquisition $125mm Asset-Based Revolving Credit Facility $ 39 $42
Slide 16: Tronox Tax Attributes
Tronox Tax Attributes Tronox should retain the ability to use the tax attributes presently available to it, including historical NOLs Tax attributes are worth at least $300 million on a Net Present Value basis These tax attributes (which are subject to audit by IRS) consist of: Pre-emergence NOLs (~
Slide 17: Transaction Overview
Transaction Overview Tronox issuing shares to Exxaro in Pro Forma Corporate Structure exchange for: 26% 74% interest in KZN Sands and Public Namakwa Sands businesses Exxaro’s 50% interest in Tiwest ~61.5% ~38.5% Transaction negotiated and agreed upon based on relative Enterprise Values Pro forma equ
Slide 18: Key Transaction & Governance Terms
Key Transaction & Governance Terms 9 member board comprising: 6 Class A directors (nominated by Tronox) Management and Pro Forma 3 Class B directors (nominated by Exxaro) Board of Tom Casey to remain Chairman & CEO of combined company Directors Key members of Exxaro's senior management expected to j
Slide 19: Transaction & Governance Terms
Transaction & Governance Terms Limited significant matters require supermajority (6 of 9) approval at board level, including: Election of the Chairman of the Board Limited Board Supermajority Appointment or termination of the Chief Executive Officer Matters Material acquisitions / dispositions Sale
Slide 20: Tronox and Exxaro Mineral Sands Combination
Tronox and Exxaro Mineral Sands Combination Tronox and its Board of Directors considered various strategic alternatives to maximize shareholder value Combination of Tronox and Exxaro Mineral Sands provides (i) the most compelling way to maximize shareholder value and (ii) a higher value route to liq
Slide 21: Combined Company Best Positioned To Maximize Value & Provide Liquidity
Combined Company Best Positioned To Maximize Value & Provide Liquidity Pro Forma Business Model Pigments value chain Diversified chemicals Primarily TiO2 pigments Diversified chemicals TiO2 pigment exposure TiO2 pigment exposure TiO2 pigment exposure LTM EBITDA (1) $497 million $326 million $402 mil
Slide 22: Key Milestones and Next Steps
Key Milestones and Next Steps Prepare audited and pro forma financials Draft and file initial registration statement Receive regulatory and competition approvals Complete SEC comment and review process Distribute proxy statement and hold shareholder vote Close transaction in H1 2012 Re-listing expec
Slide 23: Appendix
Appendix 23
Slide 24: Review of Transaction Terms
Review of Transaction Terms Current Tronox shareholders to exchange existing common stock for new Class A ordinary shares in Australian-domiciled corporation (“New Tronox”) and $12.50 per share in cash Transaction is taxable to Tronox shareholders Tronox Option to receive exchangeable shares of Tron
Slide 25: Non-GAAP Measures
Non-GAAP Measures To supplement our presentation we have included “EBITDA” and “Adjusted EBITDA” which are not presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP) and is not meant to be a substitute for the most directly comparable GAAP measures of “net
Slide 26: Financial Reconciliation
Financial Reconciliation ($US in millions) LTM 2008 2009 2010 6/30/2011 1H 2010 1H 2011 Tronox Revenue $1,246 $1,070 $1,218 $1,441 $580 $803 Exxaro Revenue 336 419 636 778 284 426 Less: Pro Forma Intercompany Eliminations (1) (125) (141) (176) (241) (82) (147) Combined Revenue $1,457 $1,348 $1,678 $
Slide 27: Tronox EBITDA / Adjusted EBITDA Reconciliation
Tronox EBITDA / Adjusted EBITDA Reconciliation ($US in millions) Unaudited LTM 2008 2009 2010 6/30/2011 1H 2010 1H 2011 Net income (loss) ($335) ($39) $6 $643 $71 $708 Interest and debt expense 54 36 50 41 25 16 Income tax provision (benefit) (2) (1) 2 11 4 13 Depreciation and amortization expense 5
Slide 28: Tronox
TRONOX