TPC Group Inc., (TPCG:US) the largest producer of a chemical used in synthetic rubber, is in exclusive talks to go private in a leveraged buyout that may fetch more than $600 million, said people familiar with the matter.
TPC may get about $40 a share in the deal, which could come in a few weeks, said the people, who asked not to be named because the discussions are private. The $600 million doesn’t include debt (TPCG:US).
A takeover of Houston-based TPC, which used to be known as Texas Petrochemicals Inc., would represent a bet on continued scarcity of the rubber component butadiene. The chemical is a byproduct from making ethylene, and slumping natural-gas prices in the U.S. have led ethylene producers to use more of the fuel in the process, which yields less butadiene than other methods.
Sara Cronin, a TPC spokeswoman, didn’t immediately respond to a phone call and e-mail seeking comment.
The negotiations come after talks earlier this year, which involved chemical makers as well as buyout firms, collapsed following a jump in TPC’s share price, the people said. The stock had climbed (TPCG:US) 43 percent this year through yesterday. TPC climbed 13 percent to $37.72 at 3:38 p.m. after earlier surging as much as 19 percent.
A takeover at $40 would value TPC, including net debt, at about 7 times the company’s $126 million estimated earnings (TPCG:US) before interest, taxes, depreciation and amortization for the year. That estimate is the average of that of two analysts surveyed by Bloomberg.
TPC competes in the market for butadiene with LyondellBasell Industries NV (LYB:US), Royal Dutch Shell Plc (RDSA), and Exxon Mobil Corp. The company plans to increase its butadiene output by refurbishing a Houston plant to make the chemical from butane, a component of gas that has increased in supply with production from shale rock formations.
The chemical maker’s origins date back to a pair of plants built by the U.S. government to make synthetic rubber during World War II. The company declared bankruptcy in 2003 amid the collapse in demand for MTBE, a gasoline additive it produced. It emerged the following year.
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