TPC Group Inc. TPCG
TPC Group's $40/share take-private by First Reserve/SK Capital is a self-dealt, low-balled sale; a proper auction plus MLP re-rating would deliver materially higher value to shareholders.
Thesis
Sandell Asset Management, holding 7.0% of TPC Group, argues the pending $40/share take-private by First Reserve and SK Capital is the product of a flawed, self-dealt process: 9 of 11 interested parties contacted TPCG unsolicited, strategic bidders were systematically disadvantaged, and no go-shop period was negotiated. The Fairness Opinion compounds the harm by mischaracterizing TPCG as a commodity chemicals business and applying a 4.5-5.5x exit multiple, even though management has repeatedly described TPCG as a stable, fee-based processing business deserving of industrial-gas-like 8-10x multiples. With roughly 80% of EBITDA MLP-qualifying (C4 processing plus de-hydro projects), Sandell estimates PE buyer IRRs of 32-56% at $40/share and up to 55%+ using correct multiples. The deck urges shareholders to vote no and demand a proper auction.
SCQA
TPC Group is a fee-based C4/butadiene processing company whose board has agreed to sell itself to PE buyers First Reserve and SK Capital at $40/share following a nine-month process managed alongside incumbent management.
The process was tainted by self-dealing: strategics were sidelined, no go-shop was negotiated, the Fairness Opinion mischaracterizes TPCG as commodity chemicals, projections were low-balled, and the MLP-qualifying nature of cash flows was ignored.
Shareholders should vote against the deal and compel the Company to run a proper public auction with strategic bidders, using correct fee-based and MLP-qualifying multiples and adjusted projections.
Using an 8.5x exit multiple that reflects MLP-qualifying, fee-based cash flows, PE-buyer IRRs would reach 55%+ at $40/share — value the board is handing to the buyers rather than to public shareholders.
The three reasons
- 1
Sale process was flawed and tainted by self-dealing; no go-shop period negotiated
- 2
Fairness Opinion undervalues TPCG by mischaracterizing it as commodity chemicals, not fee-based processing
- 3
~80% of TPCG income is MLP-qualifying, warranting an 8.5x exit multiple vs. 4.5-5.5x used
Primary demands
- Vote against the proposed First Reserve / SK Capital take-private deal at $40/share
- Run a proper auction with strategic bidders encouraged and a 'go-shop' period included
- Re-rate the Exit Multiple upward to reflect TPCG's fee-based, MLP-qualifying processing cash flows
- Address mis-aligned management incentive agreements that were left un-negotiated at signing
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Praxair, Air Products, Airgas (industrial gas multiples as comparable)
- PetroLogistics (PDH) as MLP-qualifying de-hydro comparable
- Rentech Nitrogen, Terra Nitrogen, CVR Partners (variable-dividend MLP comps)
Notable slides (6)
Notes
Sandell / Castlerigg opposition deck to the TPC Group take-private by First Reserve and SK Capital. Strong CEO-quote-contradiction slide (p.5) juxtaposes prior management conference-call statements about TPCG being 'fee-based' and 'services based' against the commodity-chemical framing used in the Fairness Opinion. Visuals are text-dense institutional PowerPoint with blue/grey tables — functional, not polished. No single named author on cover; attributed to Sandell Asset Management Corp. Filename date is month-level (October 2012) so presentation_date set to 2012-10-01. Campaign phase treated as follow_up because the deck references 'our initial belief' and is a response to the preliminary proxy rather than a first salvo. Cash flows argument hinges on MLP-qualifying characterization, which is the deck's most distinctive analytical contribution.