By Malini Hariharan
It is not surprising to read that Reliance Industries has raised its offer for LyondellBasell by $1bn to $14.5bn. The blog had been told last month that a higher offer was one of the strategic moves that Reliance would have to make.
The Wall Street Journal reports the new Reliance offer would give some creditors a chance to get cash for their claims. “Creditors could also choose to receive stock in the restructured Lyondell under the new offer. A third option would allow some creditors to receive stock and also purchase additional Lyondell stock in a rights offering,” it states.
And the revised offer would give Reliance only a minority stake in the company but also a supervoting power to control Lyondell’s board.
A source close to developments had earlier told the blog that Reliance would not be interested in a small stake.
“Anything less than 26% would not be acceptable; [with 26%] there is a possibility of a board seat; there is some legal standing,” he had said.
The source was, however, unwilling to comment today on the latest move and would only say that the deal was at a sensitive stage.
The Wall Street Journal also reports that Reliance has been attempting to persuade LyondellBasell to accept its offer as “a tie-up would create up to $1 billion in cost savings from synergies between the two companies”.
But will this coupled with the $14.5bn offer be enough to tempt a reluctant LyondellBasell management? Maybe not as the company’s own restructuring plan is said to value LyondellBasell at $15.5bn.
The company’s recent announcement that it has reached a $450m settlement to satisfy a dispute with unsecured creditors indicates that it is making good progress on its own.
Is it time for Reliance to be more aggressive or is bumping up the offer a billion dollars at a time a better gameplan?