As it moves toward a pure play exploration and production company, Kerr-McGee Corp. plans to separate its chemicals business through an initial public offering (IPO) in the fourth quarter.

The Oklahoma City-based independent will retain a stake in the Tronox Inc. business unit, and the shares from the new company will be distributed to shareholders next year. Kerr-McGee did not disclose what percentage of Tronox’s ownership will be sold to the public. Analysts estimate the chemicals unit may be worth $1.4-2 million.

Kerr-McGee announced plans to either sell or spin off Tronox earlier this year after a group led by financier Carl Icahn acquired 7.7% of Kerr-McGee’s shares and pressured the board to improve the company’s share price by selling of the chemicals unit and buying back stock (see Daily GPI, April 15).

“We believe the total value received through creating a separate public company to be superior to a sale of the chemical business,” Kerr-McGee CEO Luke Corbett said in the statement.

According to a filed with the Securities and Exchange Commission (SEC), Tronox had $316.7 million in net losses in the past three years, with some of the losses related to environmental cleanup costs. Kerr-McGee has spent $1.19 billion to clean up sites contaminated by chemicals or radioactivity. The chemicals unit had net income of $400,000 on sales of $690.1 million in the first six months of 2005, according to the SEC filing.

As a separate company, Tronox will be the third largest maker of titanium dioxide in the world after DuPont Co. and Lyondell Chemical Co. The chemical is used to whiten paper and paints.

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