Reliance Industries has made an offer for LyondellBasell says an official statement released yesterday on the LyondellBasell website:
"LyondellBasell has received a preliminary non-binding offer from Reliance Industries Limited to acquire for cash a controlling interest in the company contemporaneously with the company's emergence from Chapter 11 reorganization.
"This offer is in addition to the previous non-binding equity financing proposals received by the company and represents a potential alternative to the initial plan of reorganization previously filed by the company."
This confirms months of rumours to this effect. According to an unnamed merchant banker quoted by the Times of India, Reliance would have to pay at least $12bn - double an earlier estimate by the Economic Times.
After failing in its efforts to capture Innovene and then
Dow Chemical's commodity petchems unit, this is Reliance's fresh attempt to
move into the global top league. The ICIS top 100 places LyondellBasell at the
No 4 slot of top chemical companies globally.
A marriage of the two companies would result in a formidable
giant with an annual turnover in excess of $75bn, including Reliance's earnings
from its growing oil, gas and refining portfolio. It would also create the
largest PP producer and also a top player in PE and give Reliance access to
LyondellBasell's profitable technology portfolio.
Reliance's offer is subject to due diligence and sufficient
credit support. The company issued a very cautious statement: "This review is
ongoing and there can be assurance of the outcome with respect to any of the
opportunities under review."
Reliance, it appears, is evaluating other opportunities too
in its core businesses.
LyondellBasell's statement confirms that Reliance had
earlier placed non-binding equity financial proposals and the latest offer
represented was a 'potential alternative to the initial plan of
reorganization'.
LyondellBasell was the first petrochemical giant to stumble
at the start of the crisis last year. And it looks like it could well be the
first big ticket M&A deal in what promises to be a busy season ahead.
We have already heard of IPIC on the prowl for European and US chemical
assets and then Mitsubishi Chemical confirmed that it is looking to acquire
Mitsubishi Rayon for $2.5bn.
An investment banker said last week that it was only
in the last few months that he has seen an interest in boards and ceos. Capital
market conditions have improved substantially and money will not be a
deterrent, especially for companies like Reliance which are already sitting on
huge piles of cash.
Relaince's biggest problem in the past has been its
conservative valuations which have seen the company lose out to other global bidders,
except in a few instances (Trevira and Hualon). There are already reports of
rival bids emerging for LyondellBasell from Chinese companies and private
equity investors. And ICIS news reported last week that analysts believe that
LyondellBasell would also be a good fit for IPIC.
So will Reliance change its mindset and be bolder this time?