Chemical maker TPC Group Inc TPCG.O 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 (IOSP.O) and Blackstone Group LP's (BX.N) rival bid.
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 Vaughan 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 September 30.
Mintz said an offer of $50 per share would fairly value the company.
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 December 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 million earlier.
"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.
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 August 27, when First Reserve and SK Capital made their first bid.
(Reporting by Swetha Gopinath in Bangalore; Editing by Sreejiraj Eluvangal, Supriya Kurane)