BMO: Tronox Holdings $27 Buyout Offer Is Underwhelming

On September 13, Reuters News reported that Apollo Global Management approached Tronox Holdings (NYSE: TROX) for a buyout offer totaling $4.3 billion in an all-cash deal. This equates to $27 per share. Tronox was trading at around $20 per share before the release and now is trading at $24.50.

Tronox has 8 analysts covering the stock with an average 12-month price target of $26.38, or a 10% upside. Out of the 8 analysts covering the stock, 1 has a strong buy rating, 5 have buys, 1 has a hold rating and 1 analyst has a sell rating. The street high sits at $31, while the lowest comes in at $24.

BMO Capital Markets came out with a short note after the news broke, reiterating their outperform rating and $31 12-month price target saying that the potential offer, “reaffirms our belief that the tight TiO2 industry is poised for significant earnings and FCF over the next few years.” They also believe that the potential $27 offer undervalues Tronox’s future earnings power.

BMO notes that the $27 potential offer values Tronox at 6.3x their 2022 EBITDA estimates, but calls the offer underwhelming since its undervaluing the future earning power and cash flow of the asset. They add, “we would highlight our target gives very little value for TROXs free option on the operation of the Jazan smelter as well as the value of the NOL that investors admittedly weren’t focused on but that may be seeing increased value given the Democrat tax agenda currently being discussed.”

BMO believes this is a bet by Apollo against raw material inflation as Tronox has scale in a tight market, “and the aforementioned benefit of the raw material assets that further helps them capture value all of which should help them enjoy robust cash flows and drive solid value over the near and long term.”


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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