Reliance offers c$10bn for LyondellBasell (Update 1)

lyondellleft.jpgLyondellBasell (LBI) yesterday confirmed the rumoured takeover bid from Reliance. In a statement posted on its website, it says it 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“.

It noted “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.”

On Sunday morning, the Financial Times reported that Reliance are offering c$10bn for a majority stake in the world’s 3rd largest chemical company. 2 weeks ago, the FT had said Reliance were considering a $6bn bid for LBI. At $10bn, the $51bn turnover LBI would certainly be a major step-out opportunity for India’s leading chemical company, if problems exiting Chapter 11 can be overcome.

It would be a good fit in terms of product mix, and also provide Reliance with access to LBI’s excellent technology portfolio and its global market coverage. Both could be key building blocks as Reliance moves to become a fully-fledged global player.

Reliance.jpgThe deal, if consummated, would represent a remarkable contrast in fortunes. The blog first did business with Reliance in 1984, when the company was a small producer of polyester yarn. At that point, they were seeking a licence to move upstream into PTA production. Since then, of course, they have become the world’s largest PTA producer, and also successfully back-integrated into refining and oil/gas production.

LyondellBasell was created via acquisition, first through the €4.4bn purchase of Basell from BASF and Shell, and then the $22bn purchase of Lyondell in July 2007. The blog commented at the time that this was an “extraordinary price for a commodity chemical business“, and so it has proved, with Lyondell sadly falling into bankruptcy last January.

By coincidence, the blog’s friend Rajen Udeshi, now President of Reliance’s Polyester Chain and a Senior Executive VP of Reliance Industries, will be speaking on Thursday in Amsterdam at our annual European Conference, co-organised with ICIS. It should be an interesting morning.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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