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Exxon and Shell drop sale of Infineum joint venture

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Exxon and Shell drop sale of Infineum joint venture

By Martin Arnold

Published: July 29 2008 03:00 | Last updated: July 29 2008 03:00

Exxon Mobil and Royal Dutch Shell have abandoned the planned £1.5bn-£2bn sale of Infineum, their oil additives joint venture, after private equity bids came in below their target price.

TPG Capital, Cinven, the Carlyle Group and Kohlberg Kravis Roberts were among the buy-out groups thought to be interested in bidding for the company, which was put up for sale earlier this year.

Private equity groups have been involved in a number of recent deals in the oil and gas sector, such as the buy-outs of Abbott Group and Expro International, UK-based oil services groups.

However, there had been scepticism among the buy-out firms about how serious Exxon and Shell were about selling Infineum, especially as they are under no pressure to sell with the high oil price helping them make record profits.

Some buy-out executives speculated that the auction – run by JPMorgan – may have been triggered by a desire to put a valuation on the business before one of the joint venture partners sold out to the other.

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 (£900m-£1bn).

The company, based in Abingdon, Oxfordshire. employs about 1,600 people worldwide.

It makes specialist chemicals and additives for fuels used in cars, trucks and boats, which it sells to oil companies and other lubricant and fuel sellers.

Bankers had said the question of whether the deal secured financing from banks would be an important litmus test for the fragile recovery in credit markets since the bail-out of Bear Sterns earlier this year.

The credit crunch has reduced the amount banks are willing to lend to private equity groups, forcing them to seek more expensive sources of finance, such as mezzanine notes, and making it harder for them to complete deals.

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

EDITOR’S CHOICE

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Copyright The Financial Times Limited 2008

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