Bidding War for TPC Group (TPCG) May Have Just Begun

November 14, 2012 9:08 AM EST Send to a Friend
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Is a battle for TPC Group (Nasdaq: TPCG) starting?

Recently, the company received a bid of $45 per share from the likes of SK Capital and First Reserve. However, with shares trading nearly 3 percent higher from that level and the stock at a 70 percent discount to sales, Bloomberg thinks a bidding war might happen.

Large holder Sandell Asset Management thinks so. The firm said TPC should hold an auction to allow Innospec (Nasdaq: IOSP) a chance to submit another counter offer for the company. Innospec -- working with Blackstone (NYSE: BX) -- may need to put a $47.50 per share bid in for any sort of interest to be drawn.

TPC produces butadiene, which is used in making tires, footwear, and more. Key competitors include LyondellBasell (NYSE: LYB), Royal Dutch Shell (NYSE: RDS-A), and Exxon Mobil (NYSE: XOM).

Shares are trading higher under the assumption that Innospec will pay more because it and TPC have "real synergies" and cost-cutting opportunities. Innospec could cut costs by rolling TPC's raw material production into its overall operations.

Revs at TPC should rise from $2.3 billion in FY12, up to $4.1 billion or more by FY15, making it even more attractive to potential suitors. One Eagle Asset Management manager said TPC might draw as much as $50 per share.

TPC is trading flat early Wednesday.


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Mergers and Acquisitions, Trader Talk

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Sandell Asset Management, First Reserve Corporation

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