Reliance-LyondellBasell talks resurface

Business, Company Strategy, India, M&A, Markets, Polyolefins, Technology

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

Talk of Reliance Industries acquiring LyondellBasell is once again gaining momentum. A report in today’s Economic Times says that the company is close to announcing a major overseas acquisition with the target being part of the assets of LyondellBasell. The announcement is likely to be made on or before Reliance’s annual general meeting on 17 November. Reliance shares rose 3.1% in morning trade.

Citing a banking industry source the report states that the transaction could be around $6bn, nearly double the estimate made by another media report in September.

One my industry sources says that something is brewing and Reliance is on a shortlist of companies that will be participating in LyondellBasell’s reorganisation. The source was unable to give names of others on this shortlist.

Details about the proposed buy are still sketchy and today’s media report, like the previous one, raises more questions than answers. In what form is Reliance likely to participate – will it be by acquiring an equity stake that LyondellBasell’s creditors will soon get through the company’s rights offer? Or will it be an outright purchase of some/all assets? Can it happen before LyondellBasell completes its reorganisation or will Reliance be participating in the reorganisation by buying assets/equity?

One analyst thinks that today’s report of an imminent announcement is a little premature and a major development is likely only after LyondellBasell emerges from Chapter 11.

It is difficult to evaluate how beneficial the deal would be to Reliance without knowing much of the details. There are certainly parts of LyondellBasell that would be a good fit for Reliance – its PP assets, a global marketing and distribution network and the technology portfolio.

Reliance certainly has the cash for a big ticket acquisition. But the company is not known to be very aggressive when bidding for overseas assets and this is one of the reasons why it lost out on acquisition opportunities in the past. Will it be the same story this time?

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