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Exclusive: Rockwood pulls asset sale on low offers -sources

By Greg Roumeliotis, Michael Erman and Soyoung Kim

NEW YORK (Reuters) - Rockwood Holdings Inc has canceled a combined auction of its titanium dioxide and performance additives units after failing to attract the offers it was hoping for, four people familiar with the matter said on Thursday.

The Princeton, New Jersey-based chemicals maker was in talks with private equity firms to sell the assets for between $1.5 billion and $2 billion but ended the process after it became apparent that such offers were not attainable, the people said.

Spinning off the assets instead is now an option that Rockwood is considering, one of the people said. All the people asked not to be identified because the talks were confidential. Rockwood declined to comment.

The canceled sale process comes less than a week after Rockwood agreed to sell one of its other businesses, industrial ceramics developer CeramTec, to European private equity firm Cinven Ltd for 1.49 billion euros ($1.98 billion).

The latest development underscores the challenges that Rockwood faces in the market for titanium dioxide pigments, which caters to companies making products such as paint, plastics and pharmaceuticals. The outlook for titanium dioxide pigment manufacturing has weakened with raw material costs becoming higher and product prices falling.

In February, Rockwood CEO Seifi Ghasemi described the company's lithium and surface treatment businesses as core, and said it would explore a sale of CeramTec in addition to its performance additives business and titanium dioxide business.

Rockwood's focus on lithium has been driven by the advent of lithium batteries used in cars to cut carbon emissions. The rising popularity of smartphones and tablets, which need longer-running batteries, is also fueling lithium demand.

Rockwood in February bought Finnish chemicals group Kemira Oyj's 39 percent stake in the titanium dioxide business, Sachtleben, for 97.5 million euros, and then tried to sell the unit unsuccessfully, people familiar with the matter told Reuters at the time.

Facing a deadline it had publicly announced to sell or spin off Sachtleben by the end of 2013, Rockwood bundled it with its performance additives operations in a new auction that attracted several private equity firms.

Among the firms vying for the assets were Blackstone Group LP , Advent International Corp, Apollo Global Management LLC , Bain Capital LLC, Golden Gate Capital LLC and Rhone Group LLC, people familiar with the matter said last month.

But uncertainty over the titanium dioxide business, whose earnings before interest, tax, depreciation and amortization (EBITDA) were seen by some private equity firms as turning negative this year, still weighed on the process, the people said on Thursday. Some banks were also uncomfortable with financing their offers, they added.

The titanium dioxide business generated $164.7 million in adjusted EBITDA in 2012, while performance additives generated $124 million towards Rockwood's total adjusted EBITDA of $778.9 million.

But in the first quarter of 2013, titanium dioxide generated only $8.6 million in adjusted EBITDA, while performance additives made $35.8 million towards Rockwood's total adjusted EBITDA of $168.2 million, highlighting the titanium dioxide unit's rapidly deteriorating fortunes.

(Reporting by Greg Roumeliotis, Michael Erman and Soyoung Kim in New York; Editing by Gary Hill and Ryan Woo)

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