Reliance May Look Elsewhere as Lyondell Hopes Fade

MUMBAI (Reuters) – LyondellBasell has rejected Reliance Industries’ (RELI.BO) offer that values the bankrupt U.S. petrochemicals group at $14.5 billion, Bloomberg said on Tuesday, a decision that could leave the Indian energy group having to look elsewhere for takeover targets.

Reliance, controlled by India’s richest man, Mukesh Ambani, has said his company plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions.

Reliance, which has raised a war chest for potential deals by selling $2 billion in stock in recent months, declined to comment on the Bloomberg report that Lyondell’s board had rejected Reliance’s latest offer, citing unnamed sources.

Lyondell spokesman David Harpole also declined to comment but said a new disclosure statement will be filed with a United States court “imminently”.

A creditor group led by U.S. private equity firm Apollo Management, which is controlling Lyondell’s bankruptcy process in the U.S., was expected to file a reorganisation plan on Monday. That plan is set to lead Lyondell out of bankruptcy.

Shares in India’s most valuable listed company with a market value of about $70 billion, closed 0.6 percent higher on Tuesday, underperforming the 2.1 percent gain in the benchmark index .BSESN.

“Reliance, being the size it is, will be looking at other options overseas even if this bid fails, and sooner than later, something else will come up,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services.

A deal would greatly enhance Reliance’s presence in major markets in the United States and Europe and place it among the ranks of top global chemical makers such as Saudi Arabia’s SABIC (2010.SE), Germany’s BASF (BASF.DE) and Dow Chemical (DOW.N).

“In the short term I will be happy if the bid fails because the acquisition risk has been removed and Reliance’s profits will remain unaffected,” Rawal said.

“But from a longer-term perspective, I am sad because the company could have gained a lot of synergies from this acquisition over the next few years.”

‘OFFER RAISED TWICE’

Reliance, with interests in petrochemicals, refining, oil and gas exploration and retail, has been trying to buy Luxembourg-headquartered Lyondell since November, when it made a bid valuing the target at about $12 billion.

Reliance has since raised its offer twice, sources familiar with the situation have said, but the chances of success have been clouded by the prospect that senior creditors such as Apollo may take a loss at the price Reliance has proposed and gain more from an independent Lyondell.

LyondellBasell, which was forced into bankruptcy just over a year ago amid a cash crisis, said last month it had reached a settlement with creditors over a lawsuit stemming from its 2007 leveraged buyout, paving the way for the chemical maker to exit bankruptcy. [ID:nN16248048]

Reliance is being advised by boutique U.S. investment banking firm Perella Weinberg Partners on the Lyondell bid, two sources familiar with the matter have told Reuters.

Perella could not immediately be reached for comment.

By Pratish Narayanan
(Additional reporting by Sumeet Chatterjee and Aaron Gray-Block; Editing by Anshuman Daga, Greg Mahlich)