November 22, 2009 at 1:30 am #2866
Reliance Makes Cash Offer for Bankrupt LyondellBasell (Update1)
By Jack Kaskey and Dan Hart
Nov. 22, 2009 (Bloomberg) — Reliance Industries Ltd., owner of the world’s largest oil-refining complex, made a cash offer yesterday to buy a controlling stake in closely held LyondellBasell Industries AF, the bankrupt chemicals and fuels maker.
Terms weren’t disclosed. The buyout would be coordinated with emergence from bankruptcy and represents a “potential alternative” to its reorganization plan, Rotterdam-based LyondellBasell said in a statement. The offer is subject to due diligence and sufficient creditor support, Mumbai-based Reliance said in a news release.
Reliance said earlier this month it’s considering “interesting opportunities” internationally as companies roiled by the world’s worst recession since the Great Depression struggle to maintain cash flow. LyondellBasell, a maker of plastics such as polypropylene and polyethylene, was formed in December 2007 when Basell AF paid $12.7 billion for Lyondell Chemical Co., which declared bankruptcy 13 months later.
The acquisition would help Reliance expand beyond its customer base in Asia into Europe and North America to become “a global player,” said Gregg Goodnight, an analyst at Houston-based ChemAnalysis, in a telephone interview yesterday.
Chemical makers from Germany’s BASF SE, the world’s largest, to Dow Chemical Co., the largest in the U.S., are trying to sell low-margin assets such as styrene, which is used to make plastics.
Abu Dhabi’s International Petroleum Investment Co. bought Nova Chemicals Corp., Canada’s largest chemical maker, for $2.6 billion, including the assumption of debt. Huntsman Corp. has agreed to buy plants that make titanium dioxide pigment from bankrupt Tronox Corp., barring a higher offer.
“I expect M&A to be very active in the back end of the year,” Goodnight said.
LyondellBasell sought bankruptcy protection after chemical demand plunged a year ago, he said. A concurrent drop in chemical prices reduced inventory values and related borrowing capacity, he said.
LyondellBasell said yesterday its management will work with all parties to ensure “value for the company’s creditors through the pursuit of a confirmable plan of reorganization.”
The company, which has a crude oil refinery and other operations in Houston, is a unit of New York-based Access Industries Holdings LLC, founded by billionaire Len Blavatnik.
India’s Economic Times reported on Nov. 9 that Reliance may spend as much as $6 billion to buy assets from LyondellBasell Industries. Reliance, which is controlled by billionaire Mukesh Ambani, had $5.2 billion in cash reserves in April.
“Reliance is reviewing a number of global opportunities for growth in its core business,” the company said in its news release. “This review is ongoing and there can be no assurance of the outcome with respect to any of the opportunities under review, including with respect to LyondellBasell.”
Lyondell’s plastics are used in car parts and other goods. The company operates a second refinery in France.
Lyondell Chemical and other U.S. affiliates of LyondellBasell Industries filed for bankruptcy in January. Lyondell Chemical had assets of $27.1 billion, debt of more than $19.4 billion and more than 25,000 creditors, according to the petition filed in U.S. Bankruptcy Court in Manhattan.
On Nov. 9, a group of Lyondell Chemical noteholders agreed to talks aimed at settling their lawsuit against dozens of the company’s bank lenders. The lawsuit alleged that Lyondell’s 2007 buyout, financed with $22 billion in borrowings, gave the company too much debt and caused it to fail.
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To contact the reporters on this story: Jack Kaskey in New York at firstname.lastname@example.org; Dan Hart in Washington at email@example.com.
Last Updated: November 21, 2009 19:09 EST
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