Finnish chemicals group Kemira said on Thursday it would form a titanium dioxide joint venture with U.S. chemicals group Rockwood Holdings.

The joint venture will include both companies' titanium dioxide businesses and the functional additives business owned by Rockwood.

Shares in Kemira were up 0.7 percent at 9.50 euros by 0716 GMT, compared with a 0.6 percent weaker general Helsinki bourse index.

This is positive news given that Kemira had problems with its titanium dioxide business after the U.S.-based competitors pushed their overcapacity to Europe and end-product prices have declined in euros, Glitnir analyst Jaakko Tyrvainen said.

The joint venture will create some synergies. This is not a total divestment, but leaves the option for a final divestment in the future.

The new company will be headquartered in Germany, and will be 61 percent owned by Rockwood and 39 percent by Kemira.

Kemira estimates the joint venture had a pro forma turnover of around 560 million euros in 2007.

It said the deal valued its titanium dioxide business in excess of 250 million euros ($394 million).

Kemira said the deal would result in a small capital gain for the company and reduce the company's debt by around 120 million euros.

Kemira Chief Executive Harri Kerminen said the joint venture would provide a good platform for synergy creation through a better use of capacity.

The new company will be a highly specialized titanium dioxide producer with strong market position in global niche market segments, he said in a statement.

The deal is subject to regulatory approval and is expected to close in the third quarter, Kemira said. (Reporting by Agnieszka Flak; editing by Sue Thomas)

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