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Reliance Bid For LyondellBasell Confirmed

Business, Company Strategy, Europe, India, M&A, Middle East, Olefins, Polyolefins, South Korea, Thailand, US
By John Richardson on 22-Nov-2009

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.

India could be playing a major role in the shift of basis chemicals ownership from West to East – along with the Middle East

After failing in its efforts to capture Innovene and thenDow Chemical’s commodity petchems unit, this is Reliance’s fresh attempt tomove into the global top league. The ICIS top 100 places LyondellBasell at theNo 4 slot of top chemical companies globally.

A marriage of the two companies would result in a formidablegiant with an annual turnover in excess of $75bn, including Reliance’s earningsfrom its growing oil, gas and refining portfolio. It would also create thelargest PP producer and also a top player in PE and give Reliance access toLyondellBasell’s profitable technology portfolio.

Reliance’s offer is subject to due diligence and sufficientcredit support. The company issued a very cautious statement: “This review isongoing and there can be assurance of the outcome with respect to any of theopportunities under review.”

Reliance, it appears, is evaluating other opportunities tooin its core businesses.

LyondellBasell’s statement confirms that Reliance hadearlier placed non-binding equity financial proposals and the latest offerrepresented was a ‘potential alternative to the initial plan ofreorganization’.

LyondellBasell was the first petrochemical giant to stumbleat the start of the crisis last year. And it looks like it could well be thefirst 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 chemicalassets and then Mitsubishi Chemical confirmed that it is looking to acquireMitsubishi Rayon for $2.5bn.

An investment banker said last week that it was onlyin the last few months that he has seen an interest in boards and ceos. Capitalmarket conditions have improved substantially and money will not be adeterrent, especially for companies like Reliance which are already sitting onhuge piles of cash.

Relaince’s biggest problem in the past has been itsconservative valuations which have seen the company lose out to other global bidders,except in a few instances (Trevira and Hualon). There are already reports ofrival bids emerging for LyondellBasell from Chinese companies and privateequity investors. And ICIS news reported last week that analysts believe thatLyondellBasell would also be a good fit for IPIC.

So will Reliance change its mindset and be bolder this time?