FocusReliance's bid for Lyondell may be first of several

23 November 2009 20:41  [Source: ICIS news]

A Lyondell siteBy Al Greenwood

HOUSTON (ICIS news)--The offer by Reliance Industries to gain a controlling stake in LyondellBasell Industries may well be the first of several bids for the bankrupt major, analysts said on Monday.

"It's a starting point. You have to put something out there, and you go from there," said Charles Neivert, managing director at Dahlman Rose, a US investment bank.

"This isn't going to go without any competition," he said.

Indeed, Credit Suisse said more bidders would likely emerge once Lyondell's restructuring plan is approved.

Financial terms for the Reliance deal were not revealed, although a source estimated that it was worth $9bn-12bn (€6bn-8bn).

The deal would give Reliance a controlling stake in LyondellBasell, timed with the company's exit from US bankruptcy protection.  

It was still too early to determine if the Reliance deal would go through, Neivert said. "Just because you are the only guys there doesn't mean you are going to get it."

LyondellBasell released few details of the proposal. It did not specify the size of Reliance's stake or when Lyondell could leave bankruptcy protection.

The deadline to emerge from bankruptcy protection - once proposed for the end of January - has since become a moving target.

Credit Suisse said Reliance would not likely make any firm offers until the bankruptcy court approves Lyondell's restructuring plan - something it expects would happen in mid February. At that point, more bidders could emerge, Credit Suisse said.

Sources told ICIS that possible bidders include Sinopec, Saudi Aramco and International Petroleum Investment Co (IPIC).

Indeed, any commitment now would allow lenders to take smaller losses, Credit Suisse said. As it stands, lenders need to accept larger losses, because Lyondell is carrying an unsustainable amount of debt.

"We think the lenders need to take a sizable haircut for the capital structure to work," Credit Suisse said.

Nonetheless, a successful bid would give Reliance a significant global position, Neivert said, moving it from a producer concentrated in India to one with holdings in Europe and North America, Neivert said.

Reliance is not large enough to create any anti-monopoly concerns, Neivert said. "There are still bigger players out there."

Lyondell had initially planned to emerge from Chapter 11 bankruptcy protection through a stock-for-debt exchange with senior lenders.

Lyondell said the Reliance proposal represents a possible alternative to its existing plans.

($1 = €0.67)

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