India’s Reliance set to make offer on Valero - report

27 October 2011 18:59  [Source: ICIS news]

HOUSTON (ICIS)--US energy producer Valero offered no comment on Thursday on a news story that India-based Reliance was set to make an offer on the company.

“All I can say at this point is that it’s Valero’s policy never to discuss rumours or speculation in the media,” spokesman Bill Day said.

The UK's Daily Mail reported on Wednesday that Reliance Industries is set to offer $48 per share for Valero, a 100% premium above Valero’s share price prior to news of the buyout.

A spot market broker said he heard many companies are showing interest in acquiring Valero.

Analyst Dan Lippe with Petral Worldwide said, “The only objective I can see is Reliance wants to have an asset position in the largest refined products market in the world today - and no doubt China will never allow anyone else to build, own and operate refineries in China.”

The US also offers opportunities for a refinery using material from the Canadian oil sands and shale gas and oil.

Analyst Phil Flynn with PFGBest said, “I think Reliance wants exposure to the Canadian oil sands and to the shale gas and oil production.”

Flynn said one potential problem is whether the US government would allow the transaction go through, because of national security issues.

In 2005, the Chinese National Offshore Oil Corporation (CNOOC) attempted to acquire US oil producer Unocal. A vote in the US House of Representatives referred the bid to President George W Bush, stating that the deal’s implications on national security needed to be looked at. CNOOC withdrew its bid.

Flynn said the same issue could arise if Reliance tries to buy out Valero.

By: Sheena Martin
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