Market Overview

First Reserve and SK Capital Enter into Revised Agreement to Acquire TPC Group for $45.00 Per Share in Cash


First Reserve Corporation, a leading global investment firm dedicated to the energy industry, and SK Capital Partners, a U.S.-based private investment firm focused on the chemicals sector, today announced they have entered into a revised merger agreement with TPC Group (NYSE: TPCG), pursuant to which First Reserve and SK Capital have increased the per share price to acquire all of the outstanding shares of TPC to $45.00 in cash. The revised price represents a 12.5% increase over the previously agreed price of $40.00 per share announced on August 27, 2012.

TPC has announced a special meeting of shareholders on December 5, 2012 to vote on the merger. Two of TPC's largest shareholders, QVT Fund and One East Partners, which together represent over 21% of the outstanding common stock, have signed voting agreements in support of the transaction.

First Reserve and SK Capital noted the following regarding its agreed transaction:

The transaction provides attractive value and certainty for TPC shareholders: The $45.00 per share offer provides a 34.4% premium to TPC's closing price on July 24, 2012, the last unaffected trading day prior to media reports of a possible acquisition of TPC, and an 85.2% premium to TPC's closing price on December 5, 2011, the day on which First Reserve and SK Capital first indicated their interest. The transaction, which is fully financed and is expected to receive its final regulatory approval by November 15th, could be completed shortly after the TPC shareholder meeting, and TPC shareholders could receive their consideration before year-end. In light of the revised merger agreement terms, the Board of Directors of TPC terminated discussions with Innospec (NASDAQ: IOSP) and Blackstone (NYSE: BX) concerning the previously announced non-binding expression of interest to explore an acquisition of TPC at a price of $44-$46 per share. First Reserve and SK Capital noted the following:

A binding offer from Innospec and Blackstone, which has not materialized, lacks strategic merit and potentially transfers control to Blackstone: There is little strategic fit between Innospec and TPC, with synergies largely limited to corporate overhead savings. In addition, any combination could result in significant negative synergies resulting from Innospec's competition with TPC customers, the magnitude of which could far exceed any realizable cost savings. An acquisition of TPC by Innospec is contrary to the stated acquisition strategy of Innospec, which has been focused on downstream, high margin, high growth companies, and the proposed combination would likely lead to significant margin dilution for Innospec. Any binding offer would require agreement between Innospec and Blackstone on the terms of Blackstone's investment in Innospec. Depending on its structure, an Innospec shareholder vote could be required, introducing further risk into the closing process. The transaction could also transfer effective control to Blackstone and would likely be highly dilutive to Innospec shareholders. Even if a binding offer is made, any potential transaction with Innospec and Blackstone would subject TPC shareholders to a number of additional risks and therefore would have to be at a substantially higher price in order for TPC shareholders to realize equivalent value: No deal with Innospec/Blackstone could close until 2013 due to, among other things, their need to complete due diligence, arrange financing and receive regulatory approvals. The additional time required would expose TPC shareholders to significant execution risk until the ultimate closing of an Innospec/Blackstone deal. TPC shareholders would also suffer the negative economic impact related to the time value of money and impending tax law changes. TPC shareholders would, therefore, need to receive a substantially higher offer from Innospec/Blackstone to compensate for the material risks compared to the fully financed transaction already agreed to with First Reserve and SK Capital and supported by two of TPC's largest shareholders.

Posted-In: News M&A


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