Home Blogs Asian Chemical Connections Twists expected in the LyondellBasell-Reliance story

Twists expected in the LyondellBasell-Reliance story

Business, Company Strategy, India, M&A, Polyolefins, US
By John Richardson on 24-Nov-2009

By Malini Hariharan (Malini is now joint blogger for Asian Chemical Connections)

Reliance’s bid for LyondellBasell is likely to be a long drawn out affair with potential for complications from competitive bids.

I talked to some sources familiar with the transaction and they say that Reliance is unlikely to be the only company interested in LyondellBasell. There is no official confirmation yet but some obvious names are being suggested -IPIC, Sinopec and Saudi Aramco.

One source says that the strongest contender would be Len Blavatnik of Access Industries who is trying to regain control of LyondellBasell.

This report also talks of offers by private equity players too though these are in the form of equity financing proposals to LyondellBasell’s plan of a rights issue and not a cash offer like Reliance. The rights issue is part of the company’s proposed reorganisation plan.

But Reliance still stands a good chance as some of the other probable contenders are likely to be busy working on other acquisition opportunities, he adds.

One opportunity is Dow Chemical’s basic chemicals and plastics unit. Andrew Liveris, CEO of Dow, recently said that the company is in talks with two potential partners, although no timeframe has been set for striking a deal.

Dow’s senior vice-president of hydrocarbons and basic plastics has also said that Dow’s partner would have substantial hydrocarbon and refining assets.

Any company that is successful in partnering Dow would have to forego the LyondellBasell opportunity because of antitrust issues in the US and Europe. It would not be possible for a single company to own all the assets of Dow and LyondellBasell.

Then there is IPIC’s stated interest in Bayer MaterialScience. Although the company has said that it is evaluating other opportunities it might be preoccupied in seeing this through, says the source.

He also adds that there are not too many companies globally that can prove that they have the capacity to run LyondellBasell.

Meanwhile, there are already indications that the transaction could stretch through 2010. LyondellBasell asked the bankruptcy court yesterday for time until 6 September 2010 to get sufficient creditors to vote for its reorganisation plan. The current deadline is 15 December.

Until the deadline, LyondellBasell has sole right to file a reorganisation plan. Once it expires, creditors can file their own reorganisation plans for the company.

Creditors, who are keen to recover as much money as possible, would be keen to see alternatives to the company’s plan.