Dutch firm’s board opts for proposal by creditors.
A week after Reliance Industries Ltd (RIL) raised its offer for LyondellBasell from $13.5 billion to $14.5 billion, the board of the Netherlands-based bankrupt company rejected its bid.
The Dutch firm’s creditors, led by Apollo Management, a New York-based private equity fund led by Leon Black, are said to wish to merge Lyondell with Hexion Speciality Chemicals, a subsidiary of Apollo Management.
RIL shares rose more than half a per cent after reports that LyondellBasell had rejected Reliance’s revised offer.
“The market is not unhappy about Lyondell’s rejection of the deal. It is rather confident that RIL could look at other deals which they have on their plate for an organic growth. It is a well known fact that RIL will not go for an aggressive bidding until they think it’s worth it,” said a Mumbai-based analyst.
LyondellBasell’s own restructuring plan had valued the company at $15.5 billion, which meant RIL would have had to persuade the creditors with more attractive propositions.
A Reliance spokesman declined to comment.
Analysts said with the unsecured creditors settling the dispute with Lyondell’s management, RIL’s position has considerably weakened. In February, the Lyondell management had sorted out differences with its unsecured creditors by hiking the amount it would pay them by 50 per cent to $450 million, as against the proposed $300 million. These unsecured creditors, until then, had favoured RIL’s plan.
Investors — including Apollo Management, Ares Management and Lyondell’s owner Access Industries — planned to “backstop” a $2.8-billion stock sale to take the company out of bankruptcy.
A deal between Reliance and Lyondell would have created a mammoth energy and chemicals conglomerate, with nearly $80 billion in combined revenue. LyondellBasell 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 LyondellBasell’s expertise in high-end plastics.
The Dutch firm filed for bankruptcy a little more than a year ago, amid a cash crunch and falling sales. However, with the global economic environment improving, the company’s valuations are expected to improve. RIL wished to have a controlling stake in Lyondell once the company emerged from bankruptcy, by buying out part of the shareholders’ stake and subscribing to fresh shares, as the bankrupt company would have been RIL’s ticket to Europe and the US.
