* PE firms raise offer by 12.5 percent to $45/shr
* TPC shares rise above offer price
* At least one shareholder expects a higher offer
By Swetha Gopinath
Nov 8 Chemical maker TPC Group Inc said
private equity firms First Reserve Corp and SK Capital Partners
raised their offer for the company by 12.5 percent, a month
after Innospec Inc and Blackstone Group LP's
TPC shares rose 3 percent above the new offer price of $45
in early trading on Thursday, with at least one of its largest
shareholders saying it expected a higher offer.
The latest offer, raised by $5, values TPC at about $705
million. Blackstone and TPC rival Innospec last month offered to
pay between $44 and $46 per share in cash.
The $45 per share offer price represents a 0.3 percent
premium to TPC's Wednesday close of $44.87 on the Nasdaq.
"This is a very modest increase to the original offer (from
the PE firms) and is insufficient to materially change my views
of the original offer," Chris Wallis, chief executive of TPC
shareholder Va u ghan Nelson Investment Management, told Reuters.
Wallis, whose firm was TPC's eighth-largest shareholder as
of June 30 according to Thomson Reuters data, said in September
he was not enthusiastic about First Reserve Corp and SK
Capital's original offer of $40 per share.
TPC said its board has recommended that shareholders vote in
favor of the latest offer from the two private equity firms. The
company said it has also ended talks with Innospec and stopped
providing due diligence information.
"Innospec's initial offer range was based on minimal due
diligence ... we believe their due diligence process will lead
to a higher price," said Eric Mintz, a portfolio manager at
Eagle Asset Management, the ninth-largest TPC shareholder as of
Mintz said an offer of $50 per share would fairly value the
Another top shareholder Sandell Asset Management, which
holds about 7 percent of TPC, urged the company last month to
abandon the First Reserve deal and pursue the Innospec bid.
Sandell also asked TPC to solicit offers from other
potential buyers in a "full-blown auction."
Innospec is evaluating the latest offer for TPC, company
spokesman Robert Ferris told Reuters.
Two of TPC's largest shareholders -- QVT Fund and One East
Partners, which together hold a 21 percent stake -- have signed
voting agreements in support of the deal, First Reserve and SK
Capital said in a statement.
The private equity firms added that the deal could be
completed shortly after the TPC shareholder meeting due to be
held on Dec. 5.
"A binding offer from Innospec and Blackstone, which has not
materialized, lacks strategic merit and potentially transfers
control to Blackstone," they said.
TPC said on Thursday that it had raised the termination fee
for the First Reserve and SK deal to $24 million from $19
"The fact that they would agree to a $45 per share offer,
which is in no way superior to the Innospec bid, and raise the
break-up fee is completely appalling," said Eagle Asset's Mintz.
TPC, which produces butadiene used in making synthetic
rubber for tires and other automotive products, has been hit by
a sharp fall in prices in recent months due to weak demand.
The company reported a lower-than-expected profit last week,
reflecting a 22 percent fall in butadiene prices in the third
quarter compared with the year earlier.
"If the TPC deal does not go through, we still have deals in
the queue for (our) oilfield (business) that we're working on
anyway," Innospec Chief Executive Patrick Williams had said on a
conference call last week.
TPC's bidders are betting on a long-term shortage of
Butadiene is a byproduct of the process of making ethylene
and its supply is likely to drop as companies shift to cheaper
natural gas liquids such as ethane to produce ethylene.
Shares of TPC, which has a market value of about $703
million, has risen nearly 12 percent since Aug. 27, when First
Reserve and SK Capital made their first bid.