Saudi Arabia’s National Industrialization Company (Tasnee) has entered into a conditional agreement with Australian chemicals maker Tronox to sell Cristal, its titanium dioxide (TiO2) business, for $1.673bn.

The deal, which is subject to final government and regulatory approvals, is expected to be completed in 15 months, Tasnee said in a statement to the Saudi Stock Exchange (Tadawul), where its shares are traded.

Tasnee holds a 79 per cent stake in National Titanium Dioxide Company (Cristal) and under the agreement, Cristal will sell its domestic and international titanium dioxide business – including, but not limited to, the sale of all international subsidiaries of Cristal Arabia and its assets, including the Yanbu plant.

The deal includes the issuance of 37.58 million new shares in Tronox, which represents about 24 per cent of the shareholding in the Australian firm.

“This transaction enables Cristal and Tronox to position the combined businesses for long-term success in the TiO2 industry,” said the statement, which added that the deal allows Tasnee to focus on its petrochemicals assets, downstream business and other strategic opportunities.

The combined business will create a an integrated and geographically diversified player in the TiO2 industry, with expected synergies of more than $100m in the first year and an estimated $200m in year three of the combination of the Cristal and Tronox businesses.

Cristal currently operates eight TiO2 manufacturing plants in the US, Brazil, the UK, France, Saudi Arabia, China and Australia. The firm also operates mines in Brazil and Australia, and has a research and development centre in the US. Tronox, on the other hand, has TiO2 pigment plants in the US, the Netherlands and Australia, and operates mines in South Africa and Australia.

Tasnee will “deconsolidate” Cristal assets from its consolidated financial statements and account for its interest in Tronox as an investment at the conclusion of the deal, the firm said in the statement, adding that the book value of assets lined up for sale were an estimated SR10bn at the end of last year.

Using the cash proceeds from the deal, Cristal will be able to fully repay its bank debt, which amounts to $1.673bn in Saudi Arabia. “This would result in the reduction of gross debt for Tasnee by the same amount and would significantly enhance the credit metrics of the company,” Tasnee said, adding that the actual financial impact on the company’s net income and shareholders’ equity will be determined at the date of closing of the transaction.

UK-based HSBC’s Saudi Arabia division and the US’ Perella Weinberg Partners acted as financial advisers on the deal, while the UK’s Clifford Chance and Saudi Arabia’s Abuhimed AlSheikh AlHagbani Law Firm were the legal advisers.