Chemicals maker TPC Group has agreed to be taken private for $627.2 million by private equity firms First Reserve Corp and SK Capital Partners as prices for its main product, used to make tires, remain depressed.

TPC, which produces butadiene used in making synthetic rubber for tires and other automotive products, has seen a sharp fall in prices in recent months due to weak demand.

The company, which has been looking for strategic options since late last year, was forced to write down the value of its inventory in the second quarter. It reduced butadiene production capacity in April 2009.

The Houston-based company, however, has said it expects a long-term shortage in butadiene, a byproduct of the process of making ethylene, as ethylene producers shift to cheaper natural gas liquids such as ethane.

Making ethylene from ethane, instead of oil-derived naphtha, produces less butadiene.

"First Reserve is looking forward to helping TPC Group expand its core business to capitalize on the advent of the shale plays in North America and the resulting increase in supply of natural gas and natural gas liquids," said First Reserve Director Neil Wizel.

First Reserve and SK Capital offered $40 in cash for each TPC share.

The deal value is one percent higher than the stock's closing price on Friday and 20% more than what it was trading at before Bloomberg reported on July 25 that the company was in discussions to go private.

TPC shares have risen 70% this year.

The deal, which is expected to close in the fourth quarter, is valued at about $850 million including debt, TPC said.

Shareholders representing about 22% of TPC's outstanding shares have entered into agreements to vote in favor of the deal, it said.

Perella Weinberg Partners LP advised TPC, while Jefferies & Co was the adviser for First Reserve and SK Capital.