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Shell and ExxonMobil drop plans for Infineum sale

telegraph.co.uk

Shell and ExxonMobil drop plans for Infineum sale

By Ben Harrington

Last Updated: 11:54pm BST 28/07/2008 

Shell and ExxonMobil have pulled the proposed $3bn (£1.5bn) sale of Infineum, one of the world’s largest manufacturers and marketers of lubricant additives that are used in automotive, heavy-duty diesel and marine engines.

The decision to abort the sale comes after several private equity bidders failed to table an offer that matched Shell and ExxonMobil’s asking price, said banking sources. Some of the world’s largest buyout firms – including Apollo Management, KKR, Carlyle and BC Partners – participated in the final stages of the Infineum auction.

However, the lack of cheap, readily available debt financing made it too difficult for the buyout firms chasing after Infineum to come up with a final-round bid that met with Shell and ExxonMobil’s expectations, according to people involved.

The oil production majors started to look at strategic options for Oxfordshire-based Infineum last year, with bankers at JP Morgan eventually appointed to handle a sale.

Yesterday a Shell spokesman said: “The conclusion of the strategic review is that shareholders (Shell and ExxonMobil) should retain the business.”

Employees at Infineum were told earlier this month that the joint venture would not be sold.

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  • As well as the UK, Infineum has production and research facilities in the US and Singapore. It also controls about 22pc of the worldwide market for oil additives and has an estimated turnover of $1.8bn-$2bn.

    The interest from private equity firms comes as the oil and gas sector, which has benefited from a booming oil price, has recently become an attractive target for buyout firms.

    There has been a flurry of private equity activity in the sector, including First Reserve’s £906m buyout of Abbot Group, the oil drilling rig operator, and the £1.8bn takeover of Expro, an oilfield services company, by Candover.

    However, after reaching record highs, oil prices have started to fall. This may have been another reason that the buyout firms eventually balked at the deal as it is said Infineum’s turnover has benefited hugely from passing rising oil prices on to its customers.

    The aborted sale comes as several other high-profile private equity-driven auctions have been shelved. Last week, it emerged that Bridgepoint had halted the sale of debt collector 1st Credit after Citigroup ran a lengthy auction process.

    Earlier this year Bridgepoint was also forced to abandon its planned £650m flotation of pet shop chain Pets at Home, while Apax Partners ditched a planned flotation of Tommy Hilfiger, the fashion brand.

    http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/29/cnshell129.xml

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