India's Reliance builds war chest for LyondellBasell bid

11 January 2010 10:06  [Source: ICIS news]

SINGAPORE (ICIS news)--Indian conglomerate Reliance Industries said on Monday that is has successfully raised about rupees (Rs) 34.7bn ($761m) as it builds financing for its $13.5bn (€9.3bn) bid for financially troubled polymer giant LyondellBasell.

In a statement, Reliance said 33m of its shares were sold on Monday at Rs1,050 each.

“It is clear that Reliance is building a war chest to make the bid [for LyondellBasell]. Whether it will be successful or not remains to be seen,” said an analyst with an international ratings firm.

So far, the Indian company had raised about $2bn from the three-tranched sale of treasury shares since 17 September 2009, the analyst said.

Reliance on Friday reportedly raised its offer for the world’s biggest polymer producer to $13.5bn from an initial bid of $12.0bn. The company itself had not made any other formal announcement since 21 November, when it confirmed a non-binding offer for LyondellBasell.

Financing the deal would not pose a problem for Reliance, which was sitting on roughly $5bn of cash in its fiscal year that ended March 2009, the analyst added.

While there were obvious benefits that Reliance could derive from the acquisition - the most notable of which was a global production footprint - taking on a debt-ridden company is laden with risks, the analyst said.

It would also open itself up more to the cyclicality of the petrochemical industry, the analyst said.

Reliance still awaits the result of the 12 January court hearing in the US on the revised restructuring plan of LyondellBasell, whose US operations have been placed under bankruptcy protection.

The restructuring plan, which includes a $2.8bn rights issue, and LyondellBasell’s request for an extension to have the plan approved by creditors until early September would be decided on at the impending court hearing.

That other buyers may emerge to rival Reliance’s bid for the polymer giant could not be ruled out, said the analyst.

At 15:25 hours Singapore time (07:25 GMT) on Monday, Reliance shares were trading at Rs1,087.5, down 1.4% from Rs1,103.15 on Friday, based on data from the National Stock Exchange of India.

($1 = €0.69, $1 = Rs45.58)

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By: Pearl Bantillo
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