A maturing market amid the mayhem
Reliance aims big with $12 bln bid for LyondellBasell
The move by conglomerate Reliance Industries, controlled by Ambani, to bid for bankrupt LyondellBasell is a calculated one. Markets seem to think this is a bargain and investors pushed up Reliance’s stock nearly 4 percent on Monday.
If the deal, which sources say may be worth $12 billion, goes through, it would catapult Reliance into the ranks of top petrochemical makers such as Saudi Arabia’s SABIC, Germany’s BASF and Dow Chemical Co.
The bid comes at a time when asset prices have fallen globally in the wake of the economic crisis but there are still some lingering doubts over whether the worst is over for the global economy.
Reliance hasn’t shied away from making mega investments during downturns.
Last December, Reliance commissioned a 580,000 barrels per day refinery next to its existing 660,00 bpd plant in the western Indian state of Gujarat, creating the world’s biggest oil refining complex just as global oil demand began to collapse.
Reliance has a cash pile of $4 billion and $8 billion in treasury stock that can be sold, so funding is unlikely to be an issue for the company, Macquarie said in a research note ahead of the bid. Bank of America Merrill Lynch is among the advisers for Reliance, sources said.
In its bid for Luxembourg-based LyondellBasell, which filed for bankruptcy protection in January, after being unable to make its debt obligations, Reliance, India’s largest listed firm, with a market value of about $75 billion, might be taking advantage of the lack of any competing bids.
LyondellBasell had sales of close to $51 billion in the 2008/09 financial year, while Reliance, which has interests in petrochemicals, refining, oil and gas exploration, and retail, logged revenue of about $32 billion.