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Reliance sweetens Lyondell offer

23 Feb 2010 Evaluate

Mukesh Ambani-controlled Reliance Industries (RIL) has raised its offer for bankrupt petrochemicals maker LyondellBasell (LB) to $14.5 billion. This is about $1 billion higher than its previous offer made in November.

 

A team of executives led by Chief Financial Officer Alok Agarwal is in the US for negotiations with the LB management and creditors. RIL has shown interest in participating in LB’s forthcoming reorganisation plan. Initially, the petroleum company will pitch for a minority stake in LB with super-voting power to control the management. Later, RIL will increase its equity with additional investments in the expansion programmes of the bankrupt firm.

 

LB filed for bankruptcy a little more than a year ago amid a cash crunch and falling sales. LB’s own restructuring plan has valued the company as high as $15.5 billion, meaning RIL still needs to persuade the creditors with more attractive propositions.

 

Unlike the previous offers, RIL’s new offer would give some creditors a chance to get cash for their claims. RIL may also backstop the stock sale under consideration in LB’s current reorganisation plan. This means RIL will give LB support for buying any unsubscribed shares. The Indian petroleum major had raised at least $2 billion recently as its acquisition war chest.

 

A deal between Reliance and Lyondell would create a mammoth energy and chemicals conglomerate with nearly $80 billion in combined revenue. LB is the world’s third-largest chemical maker and both companies have oil-refining operations. RIL sees major benefits from joining its petrochemical operations with LB’s expertise in high-end plastics.

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