Huntsman's acquisition of Rockwood's TiO2 business likely to make theglobal TiO2 industry more concentrated among fewer enterprises
The disappointing market conditions in the TiO2 industry has led to increasedmerger and acquisition activities, and the global TiO2 industry is likely to become moreconcentrated with fewer players. Huntsman's acquisition of Rockwood's TiO2 business is oneexample of the consolidation within the industry. However, whether the mergers & acquisitionstrend will catch on in China is uncertain, and there are domestic factors which make thisunlikely.
Huntsman, Rockwood, merger, acquisition, TiO2The disappointing market conditions in the global TiO2 industry has lasted for more than oneyear since mid-2012, and is likely continue into the future. This will force producers toreconsider whether to persevere with businesses that have low future growth expectations, or to divest from them, according to Titanium China Monthly Report issued by CCM in October.
Rockwood Holdings Inc. (Rockwood) selected the latter course of action and divested from itsTiO2 business. On Sept. 17, 2013, Rockwood announced that it has reached a definitiveagreement with Huntsman Corporation (Huntsman) to sell its TiO2 business. After severalmonths' search for suitable buyers and concessions, Rockwood finally divested from its TiO2business. The TiO2 business is valued at USD1.33 billion, including the assumption of USD225 million in pension obligations and subject to other customary adjustments. The finaltransaction value was much lower than Rockwood's expectation of USD2.00 billion as mostinvestors were cautionary amidst the current sluggish market conditions. The transaction isexpected to close during the first half of 2014, following regulatory approvals. As the sluggish market conditions make the competition more intensive, some enterpriseshave been forced out of the industry. The industry is predicted to become more concentratedamong a smaller number of enterprises, and the pricing power of international giants is likely tobe strengthened. According to the public data of Rockwood, it had a TiO2 production capacityof about 340 thousand tonnes in 2012, ranking sixth worldwide. Huntsman is ranked fourthworldwide, taking about 9% of the global market share and producing about 460 thousandtonnes of TiO2 in 2012.By acquiring Rockwood's TiO2 business, Huntsman will become the second largest TiO2producer worldwide with approximately 14% of the global market share. DuPont is the largestTiO2 producer in the world, with a global market share of 20% in 2012.Whether the mergers & acquisitions trend in the global TiO2 industry will catch on in China isuncertain. First of all, China's economy is not a totally free market economy, and mostdomestic mergers & acquisitions are led by local government. The involvement of governments makes mergers and acquisitions more complex. Secondly, 80% of domesticproducers have a production capacity that is less than 100,000t/a, which makes mergers and