24 November 2009 23:12 [Source: ICIS news]
HOUSTON (ICIS news)--The cash offer that Reliance Industries made for a controlling stake in LyondellBasell is a preliminary indication of interest - far from a final offer, a US banker said on Tuesday.
LyondellBasell has released few details of the proposal, other than calling it a preliminary non-binding offer that would be timed with the company's emergence from bankruptcy protection.
"A lot of things have to happen for it to become something that the judge and the company could accept," said Peter Young, president of investment bank Young & Partners, based in New York.
"The Reliance offer is clearly just a preliminary indication of interest," he said.
In fact, published reports indicate that Reliance still needs to conduct due diligence on the deal.
If Reliance ultimately acquires a stake in Lyondell, the deal would make the company more geographically diverse.
"Reliance is a very strong energy and chemical company, but very heavily concentrated in Asia, particularly India," Young said.
"Is it a requirement to be more in the US and Europe to be successful?" Young asked. "No, but it could be considered to be a useful move to the extent that they want to be more diverse geographically."
He added: "If you are a strong competitor in the region, there is no requirement that you go to another geography."
Moreover, the Lyondell deal does have a potential downside, Young said. "Bigger is not always better."
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