Tronox Holdings Plc · NYSE:TROX
Tronox — Merger or Acquisition (October 2011)
26 slides from Tronox's merger presentation, Oct 7, 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 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,” “expect,” “project,” “inte
Slide 3: Board considered strategic alternatives to maximize shareholder value
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 liquidity post closing without a substantial de
Slide 4: Strategic Rationale, Financial Rationale, Detailed Review of Transaction Terms
Strategic Rationale of the Transaction Financial Rationale of the Transaction Detailed Review of Transaction Terms
Slide 5: Combining a leading pigment producer and a leading ore supplier
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 critical when economic conditions i
Slide 6: Titanium feedstock market is very tight
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 Ore suppliers are succeeding in movi
Slide 7: Third-party contracts and spot purchases required to fill ore requirements
Third-party contracts and spot market purchases required to fill 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 LoM) Botlek 138 83 Tiwest JV 248 Hamilton (Merge) 248 Hamilton (15+ yr LoM) Tiwest JV 138 13
Slide 8: TiO2 Supply/Demand
TiO — Supply/Demand (1) Global TiO pigment market continues to 2 2 10,000 remain tight with major producers operating 000’ TiO2 units near full capacity (>95%) 8,000 The projected expansion of TiO2 pigment 6,000 supply reflects announced but not built production facilities most of which are in 4,000
Slide 9: Zircon Supply/Demand
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 Global Zircon demand continues to stay 1,750 1,500 significantly higher than supply 1,250 Expected strong long-term demand 1,000 driven by ur
Slide 10: Synergies: estimated run-rate savings of ~$30mm
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 & coke costs Finance Lower freight
Slide 11: Multiple levers to drive long-term shareholder value
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 ~$700 million in 2012 and increasing (1) — Intenti
Slide 12: Pro Forma New Tronox Adjusted EBITDA
Pro Forma New Tronox ex. Synergies (1) Pro Forma New Tronox (US$ 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 $497 LTM 6/30/2011 2011E 2012E Peak (E) Mid-Cycle (E) Note: Adjusted
Slide 13: Pro Forma New Tronox Implied Valuation
Tronox acquired strategic mining assets at attractive valuations Pro Forma New Tronox Implied Valuation (US$ in millions except per share data) (1) Current Tronox Share Price $92.00 Diluted Shares Outstanding (2) 26.9 Implied Equity Value $2,479 (+) New Tronox Net Debt (3) 383 Implied Enterprise Val
Slide 14: Conservative pro forma capital structure
Conservative pro forma capital structure Tronox Capitalization (June 2011) with significant financial flexibility (US$ in millions) Amount Cash $87 No incremental debt incurred in Total Debt acquisition $125mm Asset-Based Revolving Credit Facility $39 $425mm Senior Secured Term Loan 423 Future cash
Slide 15: Tronox should retain ability to use tax attributes including NOLs
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 (~$160 million) Deductio
Slide 16: Pro Forma Corporate Structure
Tronox issuing shares to Exxaro in Pro Forma Corporate Structure exchange for: 74% interest in KZN Sands and 26% 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 equity ownership determi
Slide 17: Pro forma board, lockup and standstill provisions
9 member board comprising: 6 Class A directors (nominated by Tronox) Management 3 Class B directors (nominated by Exxaro) and Pro Forma Board of Tom Casey to remain Chairman & CEO of combined company Directors Key members of Exxaro’s senior management expected to join Tronox Three-year lockup period
Slide 18: Board supermajority matters, control provisions and key closing conditions
Limited significant matters require supermajority (6 of 9) approval at board level, including: lection of the Chairman of the Board Limited Board Supermajority Appointment or termination of the Chief Executive Officer Matters Material acquisitions / dispositions Sale of the Company Decision to pay d
Slide 19: Board considered strategic alternatives to maximize shareholder value
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 liquidity post closing without a substantial de
Slide 20: Pro Forma Business Model
Pro Forma Business Model Pigments value chain Diversified chemicals Primarily TiO pigments Diversified chemicals TiO pigment exposure TiO pigment exposure 2 TiO pigment exposure 2 2 2 LTM EBITDA (1) $497 million $326 million $402 million NA NA Total Equity 465 kt 560 kt 532 kt 1,100 kt 750 kt Capaci
Slide 21: Appendix
Appendix
Slide 22: 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 $12.50 per share in cash Transaction is taxable to Tronox shareholders Tronox Option to receive exchangeable shares of Tron
Slide 23: Non-GAAP Measures
Non-GAAP Measures To supplement our presentation we have included “EBITDA” and “Adjusted EBITDA” which are not presented in accordance with Generally Accepted Accounting Principles in the United States (GAAP) and is not meant to be a substitute for the most directly comparable GAAP measures of “net
Slide 24: Financial Reconciliation
Financial Reconciliation ($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 25: 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 26: Tronox
TRONOX