DuPont (DD +0.9%) is considering alternatives to a planned spinoff of its performance chemicals unit, including a Reverse Morris Trust that could create synergies with a potential partner, CFO Nicholas Fanandakis says.
The CFO’s comments increase the chances DuPont will enter into a Reverse Morris Trust with Tronox (TROX +6%), combining the companies’ titanium dioxide assets, Alembic Global analyst Hassan Ahmed says, calculating that such a deal would almost triple the value of TROX’s net operating losses - which can be applied toward tax obligations - to $1.6B.
The firm is concerned with the potential impact of the slowdown in China's economy on TiO2 exports, and the new TiO2 plant coming online from Cristal provides additional capacity that could put more pressure on prices.
The catalyst for TROX moving higher has been the expectation that the pricing environment would improve and the company would make an accretive acquisition; the firm thinks the stock is more than fairly priced taking such scenarios into consideration.
Anadarko (APC +12.1%) confirms it has entered into a settlement with the plaintiffs in the Tronox (TROX +1.6%) case to resolve all claims against Kerr-McGee, agreeing to pay $5.15B to settle environmental claims left behind when it bought the company for $18B in 2005.
APC expects to record a gross tax benefit of ~$1.65B associated with the settlement, offset by ~$1.1B in uncertain tax positions, resulting in a net tax benefit of ~$550M.
The U.S. had initially sought $25B from APC to clean up 2,772 sites and compensate ~8,100 TROX claimants, and a court in December said APC could expect to pay damages as low as $5.2B and as high as $14.2B.
In a December ruling, U.S. Bankruptcy Judge Allan Gropper suggested a range of $5.2B-$14.5B to pay for the clean up of contaminated properties; APC's Q4 earnings report accounted for a payment of just $850M.
In a filing yesterday with U.S. Bankruptcy Court in Manhattan, APC challenged parts of a decision made last month that found it liable for $5B-$14.5B, subject to the calculation of how much APC is owed as a creditor in TROX's bankruptcy.
"The Court's approach... leads to incorrect conclusions for the calculation of damages and is contrary to [its] stated view that the purpose of the applicable law is 'remedial rather than punitive'," APC CEO Al Walker says.
Kronos Worldwide (KRO +8.1%) is now back in play for a potential takeover bid, and the death of Harold Simmons - whose estate owned most of Contran Corp., which holds a vast majority of KRO stock - may have opened the door, according to Citi credit analyst James Finnerty.
One company that might make a run at KRO is Tronox (TROX +0.7%) after raising $1.5B from a term loan issued last March, the analyst speculates.
Tronox (TROX) +8.6% premarket following last night's court ruling that Anadarko Petroleum and its Kerr-McGee unit acted with intent to delay and hinder TROX's creditors at the time of the spinoff.
The court found APC liable and indicated a damage award of as much as $14.5B - the value is still to be determined - but TROX will receive no immediate or direct benefit from the ruling; instead, 88% of the judgment will go to trusts and other governmental entities to remediate polluted sites.
TROX expects to receive tax deductions equal to the amount spent by the trusts, which will accrue over the life of the trusts as the funds received by the judgment are spent; the expenditures and accompanying tax deductions may continue for decades, potentially amounting to hundreds of millions of dollars annually.
Anadarko Petroleum (APC) -12.5% AH after a bankruptcy judge rules its Kerr-McGee unit acted improperly in the 2005 spinoff of Tronox (TROX) and should pay for environmental cleanup and to compensate people who claim damage from toxins.
The U.S. government had sought to recover $25B to clean ~2,700 polluted sites and compensate about ~8,100 tort claimants; a trust set up to pay plaintiffs calls for 88% of the judgment to go to trusts for cleanup, according to court papers, with the remainder going to toxin claimants.
The judge says APC and Kerr-McGee intended to “hinder and delay" when they transferred out and spun off oil and gas assets.
Huntsman (HUN +2.6%) is upgraded to Buy from Hold with a $24 price target at KeyBanc based on valuation and earnings upside driven by further improvement in the polyurethanes and performance products segments, which account for more than 70% of sales.
The firm also sees the possibility of portfolio changes in coming quarters as another positive catalyst for HUN shares.
Tronox (TROX +7.9%) shares are higher on rumors HUN is interested in the company, which also is a major player in the titanium dioxide market.
Anadarko Petroleum (APC -1%) is reiterated with a Buy rating at Deutsche Bank following mixed Q2 results, as the firm continues to think uncertainty stemming from potential Tronox (TROX) liabilities creates opportunity.
The firm thinks a post-Tronox outlook should see APC narrow the discount to NAV via aggressive asset sales and monetizations.
"APC arguably enjoys the best multi-year set up in the global upstream," DB says, continuing to view the stock as a core holding.
Jacobs Engineering (JEC) lands a five-year $855M contract to provide logistics support for the Marine Corps and also says Tronox (TROX) has awarded the company a deal to provide early stage engineering for an aluminum chloride generator in Australia. Terms of the latter contract were not disclosed.
Tronox Ltd produces and sells titanium- bearing mineral sands and titanium dioxide pigment. It has two reportable operating segments, Mineral Sands and Pigment. Its corporate activities include electrolytic manufacturing and marketing operations.