Exxaro Resources Ltd. Plans to sell its 44% stake in Tronox in order to raise funds and help the company focus on its core operations, according to a statement from the company. Exxaro’s board will explore various alternatives to monetise the stake in a “thoughtful, efficient and staged process over time”, according to the company’s statement. The stake sale is not expected to start until 2H17.

We expect this is likely to put pressure on Tronox’s stock price in the medium term, which could also lead to pressure on Tasnee’s stock price given the deal struck between the two parties earlier this year (note that Exxaro has indicated that they intend to vote in favour of the Tronox-Cristal deal). Based on the statement from Exxaro, the company is looking to sell the stake down gradually, but this is still likely to prevent Tronox’s stock price from gaining any positive momentum for the rest of the year. A positive surprise here would be if Exxaro managed to monetise the entire stake to a major buyer, although this does not appear to be plan based on the company’s statement. While this is ST negative for Tasnee, it does  not change any fundamentals of the deal, and we remain positive on it from a strategic perspective.

In February, Tasnee announced that they have come to an agreement to sell Cristal (79%-owned TiO2 subsidiary) to Tronox Ltd for a cash consideration of USD1.673bn (SAR6.274bn) and a 24% share in Tronox shares via the issuance of 37.58mn new shares.

National Industrialization Company: SAR16.80 as of 8 Mar. 2017, Rating: Neutral, TP: SAR14.50/share, MCap: USD2,997mn, NIC AB/2060.SE