Sandell Asset Management Responds To TPC Group Preliminary Proxy: Details Flawed Auction Process And Low-Balled Valuation
NEW YORK, Oct. 2, 2012 /PRNewswire/ -- Sandell Asset Management Corp. ("Sandell"), the beneficial owner of approximately 1.1 million shares, or 7.0%, of TPC Group ("TPCG") (NASDAQ: TPCG), is issuing a second White Paper to TPCG's shareholders in response to the preliminary proxy pertaining to the sale of TPCG to private equity firms First Reserve & SK Capital ("PE Buyers"). Sandell has been a long term shareholder of the Company, leading its restructuring and exit from bankruptcy in 2004.
A full copy of the White Paper can be found here: http://www.sandellmgmt.com/news/Immediate_Maximization_of_Value_at_TPCG_2.pdf
The following are highlights of Sandell's views, as set forth in more detail in its White Paper presentation, based upon its review of the preliminary proxy statement:
- We stand by our initial belief that the sale process was flawed and tainted by 'self-dealing'.
- Given the level of strategic interest, the fact that a 'go-shop' period was not negotiated to ensure that shareholders receive the maximum value for their shares evidences the self-interest which poisoned this process.
- The projections employed were low-balled to the benefit of the PE Buyers and management, and the Exit Multiple needs to be re-rated upwards to reflect the MLP-qualifying nature of TPCG's stable, processing-based cash flows.
- Potential strategic bidders were never adequately solicited, and those that expressed interest were unquestionably at a disadvantage compared to financial bidders, despite the overwhelming evidence that strategic acquirers usually pay more given operational and financial synergies.
- Upon analyzing the Fairness Opinion valuation methodologies, we believe the opinion was biased towards a low valuation for TPCG:
- TPCG is repeatedly and incorrectly compared to volatile, commodity chemicals companies – contrary to TPCG management's own guidance to compare TPCG to stable industrial gas suppliers such as Praxair, Air Products and Airgas. We believe the PE Buyers would project out-sized IRRs of 55%+ when using the correct multiples.
- The projections being used for the core business and Project Phoenix are low-balled and are well below what management communicated to shareholders as recently as July 2012.
- Management incentive agreements have purposely 'not been negotiated' as of the time of the transaction to keep shareholders ignorant about the significant misalignment of incentives between management and the shareholders.
Sandell intends to vote against the deal, encourages its fellow shareholders to do the same, and seeks to have the Company run a proper auction to maximize shareholder values.
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