TPC President and CEO Michael T. McDonnell noted in a company-wide letter on Oct. 8 that his companys board of directors had not changed its recommendation that TPC stockholders approve the merger agreement with the equity companies, but had authorized negotiations with Innospec. It is not anticipated that any further developments will be disclosed with regard to these specific discussions unless the TPC Group Board makes a decision with respect to this proposal, he added.

TPC Group can produce 117,500 metric tons of polyisobutylene per year at its plant in Houston, and is the countrys largest merchant supplier of PIB and highly reactive PIB. PIBs are used as base stocks in lubricants – sometimes as an alternative to bright stock – and as a component in metal forming fluids, gear oils, greases and two-cycle oils. They are also used in other applications such as caulks, sealants, adhesives and rubber. Highly reactive PIBs are used as dispersants in lubes and fuels, and to make other additives.

The companys board of directors in September approved a $265 million project to boost its capacity to 650 million pounds a year of isobutylene, the feedstock for PIB. The project includes refurbishment of some of its dehydrogenation assets at its Houston operations, which is expected to be completed in 2014.

TPCs 2011 revenue was $2.8 billion and its total assets as of June 30 were $985 million.

In announcing Innospecs proposal, President and CEO Patrick Williams said, We believe that TPC is a good strategic and synergistic fit with Innospec. At this stage, our proposal is subject to certain conditions, including completion of our due diligence, Innospec obtaining all necessary internal approvals and agreeing to definitive documentation. We do not anticipate making a further statement until such time as our process is complete.

In an Oct. 8 filing with the U.S. Securities and Exchange Commission, the TPC board stated it had determined in good faith, after consultation with its independent legal and financial advisors, that the [Innospec] proposal would reasonably be expected to lead to a Superior Proposal to that offered by First Reserve and SK Capital.

Innospec, in an Oct. 9 SEC filing, stated, We believe acquisition of TPC has the potential to augment our revenue and earnings growth through opportunities within TPC’s existing businesses and also the potential to create additional value from the combination of TPC with Innospec’s current operations, which include fuel additives, performance chemicals and octane additives.

It reported that it will receive equity financing from Blackstone Capital Partners VI, L.P.

Innospec, which employs approximately 850 people in 20 countries, has regional offices in the Americas, Europe, Middle East and Africa and Asia-Pacific. It hand net sales last year of $774 million and total assets of $603 million as of June 30.

Innospec is the world’s only manufacturer of tetraethyl lead (TEL), which it has been producing for more than 60 years. The addition of TEL to gasoline allows engines to operate at higher compression ratios without knocking. It remains an ingredient in aviation fuel.

With growing concern and regulations governing emissions, the demand for TEL continues to decrease. TEL usage in gasoline has been largely phased out by most nations primarily because of the toxicity of the lead emissions from spark-ignited internal combustion engines fueled by gasoline containing TEL. Leaded gas continues to be used in some parts of Latin and South America, Asia, North Africa and the Middle East, but Innospec has said that the TEL business is in terminal decline, and must be replaced.