What’s next for Reliance?

Business, Company Strategy, India, M&A, US

By Malini Hariharan

Reliance Industries appears to have hit the end of the road in its quest for LyondellBasell which has filed its own restructuring plan, rejecting a $14.5bn Reliance offer.

LyondellBasell has said the Reliance offer was not “sufficiently valuable to abandon” its amended reorganisation plan.

“The proposal…did not assure a higher overall value for LyondellBasell than that upon which the [reorganisation] plan is based; it continued to provide Reliance with effective control over LyondellBasell, even if it owned only minority position and did not pay a premium,” LyondellBasell said in its court filing.

“It [Reliance] did not put any Reliance assets at risk should a transaction be pursued and fail,” LyondellBasell added.

It is not surprising to read that Reliance has distanced its Indian assets. The Basell and Lyondell merger has clearly revealed the risks of failing to do so.

LyondellBasell is now waiting for the court to approve its plan and hopes to emerge from bankruptcy by the end of the year.

Media reports say that Reliance will not be increasing its offer although the company has yet to confirm this.

But analysts, who think anything over $14.5bn would be too expensive, have already started suggesting that it is time for Reliance to look at other acquisitions.

One analyst suggests that Dow Chemical’s commodity chemical assets would be a better fit. Dow had attempted to spin off into a joint venture with Kuwait’s Petrochemical Industries Co (PIC) but the deal was called off at the last minute.

The analyst suggests that Reliance could look at a similar joint venture or even an outright purchase and this would be cheaper than LyondellBasell as Dow has indicated that it is looking for $8-12bn while LyondellBasell is unlikely to come to the negotiating table for anything less than $16bn.

But Reliance had tried for Dow’s assets and lost out to PIC. Dow recently confirmed that it is in talks with three companies for a divestment. And industry sources say that a deal with PIC could still be possible.

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