* Innospec says in interest of investors to withdraw the offer
* TPC recommends deal with First Reserve Corp, SK Capital Partners
* TPC shares down 7 percent
Dec 3 Innospec Inc withdrew its offer of about $745 million for chemical manufacturer TPC Group Inc , potentially paving the way for the success of a rival bid from First Reserve Corp and SK Capital Partners for the butadiene maker.
TPC shares fell 7 percent to a near-one-month low of $44.57 in afternoon trading on the Nasdaq on Monday, while Innospec shares were up about 2 percent.
First Reserve Corp and SK Capital Partners are offering $45 per share for TPC, lower than Innospec's $47.50, but TPC recommended that its shareholders vote in favor of a deal with the two private equity firms.
The two firms and TPC have repeatedly called the $45-per-share offer superior, saying, among other things, that it was unlikely that Innospec would close a deal this year.
Innospec Chief Executive Patrick Williams said on Monday that it was in the interest of the company's investors to withdraw the proposal.
At least two TPC shareholders -- Eagle Asset Management and Sandell Asset Management, which together hold about 10 percent of the company -- have shot down the offer from the two private equity firms as inadequate.
Proxy advisory firm Institutional Shareholder Services has recommended TPC stockholders vote for the proposed transaction with First Reserve and SK Capital, the private equity firms said in a statement.
Innospec, whose bid was backed by Blackstone Group LP , was expected to submit a definitive proposal for TPC by Dec. 5, when TPC shareholders are to vote on a deal with First Reserve and SK Capital.
"At this late stage, we would not expect another buyer, leaving TPC shareholders to vote for First Reserve and SK's $45 per share offer on Dec. 5," Oppenheimer & Co analyst Edward Yang said in a note to clients.
However, Yang said he believes TPC merits a higher valuation, and cut his price target on the company's stock by $10 to $45 per share, citing increased likelihood of the First Reserve and SK Capital proposal getting shareholder approval.
What makes TPC attractive is butadiene, analysts say. They predict a long-term shortage of butadiene -- a by-product of ethylene production -- as ethylene producers shift to cheaper ethane, which yields lesser butadiene, from naphtha.
Butadiene is used to make synthetic rubber for tires and other automotive products.