A Plastics News Report
New York -- As expected, Reliance Industries Ltd's $14 500-million bid to buy LyondellBasell Industries AF SCA has been rejected.
LyondellBasell disclosed the decision in an 8 March filing in the US Bankruptcy Court in New York, where the company is pursuing a reorganisation plan. In to an updated plan filed with the court, Rotterdam, Netherlands-based LyondellBasell will exit bankruptcy on 30 April.
The plan gives details about the now-scuttled proposal from Mumbai, India-based Reliance, noting that the Indian group had three months to undertake due diligence on LyondellBasell's operations, following a 14 Nov non-binding offer for the company on 14 Nov.
As well as being a major polyolefins supplier, LyondellBasell claims to be the world's largest producer of propylene oxide (PO), used among other things, in making polyols for the polyurethanes sector. The group has nearly 2100-kilotonnes-per-annum (ktpa) capacity for PO at two sites in the US, three in Europe and a joint venture in Japan.
News reports at the end of February said the group's latest joint venture styrene monomer/PO plant with Sinopec Group, at Sinopec Zhenhai Refining & Chemical Company in Ningbo, has recently started trial production. The plant is planned to produce 285 ktpa of PO and 620 ktpa of styrene monomer.
In the court filing about Reliance's offer, LyondellBasell said it devoted 67 LyondellBasell staff and advisors to: guiding in-person visits to over 20 of the company's key facilities worldwide; three days of management time for presentations and question and answer sessions; two days for due diligence sessions with Reliance's proposed funding banks; and (d) participating in many other meetings and telephone calls with Reliance and its advisors. LyondellBasell also set up an electronic data room for Reliance, which provided access to thousands of documents.
Finally, Reliance submitted another non-binding proposal on 18 Dec. But LyondellBasell's debtors "continued to encourage Reliance to better its proposal and to encourage large creditors to meet with Reliance.'
On 7 Feb, the debtors requested in writing that Reliance "provide its final and best proposal by 19 Feb."
Reliance delivered a non-binding offer on 21 Feb - reported to be for $14 500 million. But LyondellBasell's debtors rejected it, citing a number of concerns:
* Reliance's insistence on having effective governance and shareholder control, even if it owned a minority of LyondellBasell's equity;
* The dilutive effect of the purchase price associated with the proposed direct equity investment by Reliance;
* The potential for delay, and associated costs, that would be involved with pursuing a bid from Reliance;
* The lack of any mechanism to defray the risks of delay; and
* Reliance's dependence on "speculative and disputed future profit opportunities" that it argued would represent an opportunity for increased value if the debtors accepted the plan.
"After the debtors' management board and independent supervisory board members analysed the most recent Reliance proposal, the debtors concluded that it is not higher and better than the [company's reorganisation] plan, and thus it does not warrant deviating from the plan and assuming associated execution risk," the company said in the court filing.
Now that LyondellBasell has officially rejected Reliance's offer - a proposal that would have been one of the largest buyouts in the history of the plastics industry -speculation again turned to whether Reliance will continue to try to find a deal that will give it a bigger global footprint.
A source at Reliance told Agence France-Presse: "Lyondell made it clear that they were not interested in our bid. It is time to look ahead for other global acquisitions. We will consider all options."
This is not the first time that Reliance has unsuccessfully pursued a big plastics-related acquisition. In 2006-07, the company was reportedly interested in buying GE Plastics - but Reliance lost out to Saudi Basic Industries Corp.