FocusInnospec eyes fuel and lube additives in TPC bid – analyst

08 October 2012 19:16  [Source: ICIS news]

NEW YORK (ICIS)--UK-headquartered specialty chemicals firm Innospec’s interest in acquiring US-based butadiene (BD) producer TPC Group is likely driven by TPC’s production of a key component in fuel and lubricant additives, an analyst said on Monday.

Innospec is probably interested in TPC’s Performance Products business - fuel and lubricant additives,” said Ed Yang, analyst with investment bank Oppenheimer.

TPC Group is North America’s “sole merchant producer of highly reactive polyisobutylene, a major component of dispersants for the fuel and lubricant additive markets”, it stated in its 10-K annual filing with the US Securities and Exchange Commission in February.

Earlier today, TPC announced that it received a non-binding proposal to be acquired by Innospec through an all-cash purchase price in the range of $44-46/share.

Equity financing for the proposed acquisition would be provided by US private equity firm Blackstone.

The proposal trumps an agreement by global investment firm First Reserve and US private equity firm to buy TPC for $40/share, which was announced in August.

In late August, Thomas Sandell, CEO of Sandell Asset Management, blasted the deal as an attempt “to steal the company at a grossly suboptimal price in a sweetheart LBO [leveraged buyout] with a favoured buyer in an impaired sale process at the bottom of the cycle”.

“We are not surprised [at the new proposal], as we’d been consistently doubtful that a transaction could close at $40/share given that it significantly undervalues the company and [that there would be] limited downside to rejecting [it],” said Yang.

The analyst expects TPC to eventually be sold in the $50/share range, representing multiples of around 13 times price/earnings (P/E) and 5.8 times earnings before interest, tax, depreciation and amortisation (EBITDA).

TPC’s Performance Products business – which makes products for fuel and lubricant additives − generated $271m (€209m) in sales in the first half of 2012, accounting for about 20% of total sales.

Innospec’s fuel specialties segment comprises the bulk of the company’s business.

In the first half of 2012, the segment generated $245m in sales, accounting for 65% of sales.

TPC said it will “carefully consider and evaluate the non-binding proposal from Innospec and its equity financing partner, and has authorised discussions and negotiations with them and is making arrangements to facilitate their due diligence review”.

Innospec did not immediately respond to a request for comment.

Additional reporting by Brian Ford in Houston

($1 = €0.77)

By: Joseph Chang
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly