Private equity bidders vie for Infineum

Financial Times: Private equity bidders vie for Infineum

By Martin Arnold and Lina Saigol
Published: April 16 2008 04:17 | Last updated: April 16 2008 04:17

Private equity bidders were this week queuing up to submit £1.5bn bids for Infineum, an oil additives venture between Exxon Mobil and Royal Dutch Shell, in what would be one of the biggest buy-outs in the UK this year.

TPG Capital, Cinven, the Carlyle Group and Kohlberg Kravis Roberts are among the firms that have submitted bids for Infineum this week or are expected to do so shortly.

The strong interest from private equity underlines how the oil and gas sector has become an attractive target for buy-out firms as it benefits from a booming oil price, while more cyclical sectors such as retail and property look less appealing.

There has been a flurry of private equity activity in the sector, including First Reserve’s £906m buy-out of Abbot Group, the oil drilling rig operator, and a £1.3bn approach by Candover to buy Expro International, an oilfield services company.

Other buy-out firms rumoured to be interested in Infineum include Bain Capital, BC Partners, Apollo Management and Vestar Capital Partners.

JPMorgan is running the auction and had initially offered bidders a staple financing package, but this has now been withdrawn, according to people close to the situation.

Rival bankers said the question of whether the deal secured financing from banks would be an important litmus test for credit markets.

Private equity groups have been attracted to companies providing support services or equipment to the oil and gas sector because they carry less oil price risk and have strong order books.

Infineum, which has production and research facilities in the UK, US and Singapore, controls about 22 per cent of the worldwide market for oil additives and has an estimated turnover of $1.8bn-$2bn (£917m-£1bn).

PwC said in its annual review of oil and gas deals that private equity was becoming increasingly active in the sector. “Remarkably, three of the top 10 oil and gas deals involved private equity buyers. The extent of private equity investment in the top 50 deals is something that has not been seen in the sector in recent years.”

Separately, a report from Baird, the investment bank, will this week show that the credit crunch has hit mid-sized mergers and acquisitions in the UK. For deals worth £250m-£500m, Baird said the value of UK M&A in the first quarter was £2.9bn, down 60 per cent from £7.3bn in the first quarter of 2007. The value of all deals worth £500m or less fell 37 per cent to £11.8bn.

Copyright The Financial Times Limited 2008

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