Tronox Incorporated TROX
Post-Exxaro Tronox is the lowest-cost, fully-integrated TiO2 producer; levering up for a $24-$43/share special dividend plus relisting unlocks $183-$194/share, 56-66% upside.
Thesis
Sandell Asset Management argues that Tronox, the #5 global TiO2 producer emerging from bankruptcy and closing the transformative Exxaro mineral sands acquisition, is significantly undervalued because management is moving too slowly to realize fair value. Post-deal New TROX will be 100% vertically integrated and 100% chloride-based, with the lowest cash cost per ton ($1,827 vs. $2,214-$3,605 for peers), a 51% EBITDA margin, and ~$700 million of levered free cash flow (>20% FCF yield) against only 0.5x net debt/EBITDA. Sandell urges management to lever up to 1.0x-1.5x mid-cycle EBITDA and return $24-$43/share in a special cash dividend, relist on the NYSE, effect a stock split, and court bulge-bracket analyst coverage. Executing these catalysts yields a sum-of-parts value of $183-$194/share, implying 56-66% upside.
SCQA
Tronox (TROX), the 5th-largest global TiO2 producer, emerged from Chapter 11 in February 2011 with a clean balance sheet and is closing the Exxaro mineral sands deal, making it the only 100% vertically integrated, all-chloride pure-play in the sector.
Management is too slow: pro forma leverage of 0.5x is wastefully conservative, the stock trades OTC without bulge-bracket research coverage, and the Exxaro deal has further delayed the anticipated NYSE relisting catalyst.
Lever up to 1.0-1.5x mid-cycle EBITDA to fund a $24-$43/share special cash dividend, relist on NYSE, execute a stock split to improve liquidity, and close the Exxaro transaction expeditiously.
Post-catalyst fundamental value of $183-$194/share (including the special dividend) versus current levels, representing 56%-66% upside based on 8.0x P/E on $18.90-$19.91 pro forma EPS.
The three reasons
- 1
Post-Exxaro TROX will be the only 100% vertically integrated, all-chloride TiO2 producer with >20% FCF yield
- 2
Conservative 0.5x net debt/EBITDA leaves room for a $24-$43/share special cash dividend
- 3
NYSE relisting and stock split will unlock bulge-bracket analyst coverage and close the valuation gap
Primary demands
- Optimize pro forma balance sheet by levering up and paying a large special cash dividend of $24-$43/share
- Relist TROX on the NYSE
- Significantly increase research analyst coverage
- Improve liquidity via a stock split
- Complete the Exxaro mineral sands deal without further delay
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (4)
Notes
Sandell's Castlerigg vehicle holds ~1.8% of TROX. Deck quotes Tronox management's own 10/6/11 presentation and 10/10/11 conference call verbatim to argue the balance sheet is under-levered and capital-return plans insufficient (CEO-quote-contradiction pattern). Author is the firm only — no individual signatory on cover or closing. Visual execution is basic Times Roman titles with standard PowerPoint chart styling; functional but not editorial. No explicit sum-of-parts build — valuation rests on a single mid-cycle EBITDA / P/E framework plus a special-dividend bridge, so contains_sum_of_parts set to False despite peer breakdown slide. Campaign phase classified as initial_thesis: this is the first public Sandell presentation on TROX (prior ownership noted but no earlier public campaign document).