Is Reliance Bidding For LyondellBasell ?

Is Reliance Industries Ltd (RIL) in talks to buy bankrupt LyondellBasell, one of the world's largest polymers, petrochemicals and fuels companies? The buzz on Dalal Street is that RIL is looking to is looking at acquiring some or all of the assets of the company.

On December 20, 2007, Basell, owned by New York-based investor Len Blavatnik's Access Industries, acquired Lyondell Chemical Company through an all-cash leveraged buyout at $48 per share. This deal left the combined entity, LyondellBasell saddled with a heavy debt load.

LyondellBasell filed for Chapter 11 Bankruptcy under the US Bankruptcy Code on January 6 this year because of a short-term liquidity crisis. The company had USD 27 billion in assets and USD 19 billion in debt when it filed for bankruptcy. The company also had annual revenues of USD 50.7 billion in 2008.

Adding further fuel to the fire, on Tursday 17th September, RIL sold 1.5 crore treasury shares at an average price of Rs 2,125/share and raised Rs3,188 crore (USD 655 million). The treasury shares were created in May 2002 after the merger of Reliance Industries with the Reliance Petroleum (the old entity). The Petroleum Trust which was created to house the treasury shares still owns 9 crore worth 18000 crore (assuming RIL trades at Rs 2000/share). This money could be used to fund the LyondellBasell deal.

As per news reports RIL declined to comment on the rumored deal, but said "the company is committed to growth and creating value for long-term investors. Its sale of treasury shares on Thursday indicates the management intends to make large investments".

LyondellBasell’s reorganization plan will be provided to the US bankruptcy court on October 14, so that is when the details will be made public. So if the buzz on the street is right, the information should be in public domain before October 14.

Read about LyondellBasell’s bankruptcy here