* Innospec raises offer to $47.50, valuing TPC at about $745 mln
* TPC, Innospec renew negotiations
* TPC continues to back offer from First Reserve Corp, SK Capital Partners
By Swetha Gopinath
Nov 15 Chemical maker Innospec Inc raised its bid for peer TPC Group Inc to about $745 million, aiming to thwart a rival offer from private equity firms First Reserve Corp and SK Capital Partners.
Innospec raised its bid to $47.50 per share in cash, from its earlier proposal of $44.00 to $46.00 per share. Blackstone Group LP is providing equity financing to Innospec for the deal.
Investors bid up TPC Group shares 4 percent to $47.99 on hopes of a bigger offer.
TPC suspended negotiations with Innospec last week, when First Reserve Corp and SK Capital Partners raised their offer by $5 to $45, valuing the company at $705 million.
TPC Group said on Thursday that it had renewed negotiations with Innospec and allowed the company to resume due diligence.
"TPC's board reopening negotiations is a positive. And we are getting closer to what we believe is fair value for the company," said Eric Mintz, a portfolio manager at Eagle Asset Management, the ninth-largest TPC shareholder as of Sept. 30.
Mintz said an offer of $50 per share would fairly value the company.
At the heart of the bidding war for TPC is butadiene, which is used to make synthetic rubber for tires and other automotive products and is a by-product of ethylene production.
But analysts predict a long-term shortage of butadiene as ethylene producers shift from naphtha to cheaper ethane, which yields less of the product.
"Our diligence so far has confirmed our initial findings that TPC is a good strategic fit with Innospec," Chief Executive Officer Patrick Williams said.
"We were disappointed to have been denied sufficient access to complete our due diligence."
Innospec said it expects to submit a definitive proposal by Dec. 5, when TPC shareholders are due to meet.
TPC continues to recommend that shareholders vote in favor of a deal with First Reserve Corp and SK Capital Partners.
The company said on Thursday that it had started a cash tender offer for $350 million of outstanding secured notes due 2017 in connection with the proposed deal with First Reserve Corp and SK Capital Partners.
The tender offer was subject to the deal with the two private equity companies going through, TPC said.
TPC has backed the offer from the two private equity companies citing uncertainty about when a transaction with Innospec would ultimately close, among other things.