Reliance Industries (RIL) may make a firm bid to acquire bankrupt chemicals and fuel maker LyondellBasell Industries AF in February 2010 after $20 billion of debt owned by the troubled firm is restructured.
A New York court is expected to approve a plan of restructuring LyondellBasell by February and it is highly unlikely that RIL would make any firm offer until then because all cash infused now would go to lenders, sources in the know said.
Once the $20 billion debt is restructured by way of converting some of it into equity and lenders taking a haircut for the rest, RIL would offer between $12 billion and $12.5 billion. The offer would include RIL taking over about $5 billion worth of debt, they said.
A RIL spokesperson declined to comment. Industry sources said once the restructuring plan is approved, more bidders like Chinese firms may emerge.
LyondellBasell had negative equity of around $6 billion at the end of 2008. The company filed for chapter 11 bankruptcy protection in January 2009, and the restructuring process is on.
Sources said RIL's bid for controlling stake would be subject to several conditions, including the approval of the US government.
In 2005, Chinese oil company Cnooc withdrew its $18.5 billion takeover bid for California energy firm Unocal Corp owing to resistance from politicians in Washington. A year later, the then Bush administration cited security concerns to reject takeover of P&O Ports by Dubai Ports.
LyondellBasell has large capacities and access to markets, needed for RIL's petrochem business to grow outside India.
If a deal is struck, it would create a global energy and chemicals powerhouse with nearly $80 billion in combined revenue. LyondellBasell is the world's third-largest chemical maker, and both companies have oil-refining operations.
LyondellBasell on Saturday termed RIL's offer "preliminary" but said it could serve as an "alternative" to the initial reorganization plan the company filed in a New York bankruptcy court. The firm said it would "continue to work with all parties to design an approach that maximizes value for the company's creditors".
Sources said RIL wants to close the deal by fiscal end. It has $4.16 billion in cash and cash equivalent instruments.
LyondellBasell would give RIL access to the US fuel market, the world's biggest, and make it the largest producer of polypropylene used in refrigerator casings. The company had $50.7 billion in revenues last year, of which about 34 per cent came from fuels, including gasoline, diesel, jet fuel and additives. About 30 per cent was from chemicals, including ethylene, propylene and benzene, and 35 per cent was from plastics.
