Reliance plans to buy world's third largest petrochem firm

The Mukesh Ambani-led Reliance Industries (RIL), India’s largest company, has plans to buy controlling stake in the world’s third largest petrochemical company LyondellBasell.

LyondellBasell is headquartered in the Netherlands but based in the US. It filed for bankruptcy in the US under Chapter 11 because of the global financial crisis. A LyondellBasell spokesperson confirmed it had “received a preliminary non-binding offer from Reliance Industries Limited.”

Times of India reports that if things go right for RIL , this will be the biggest acquisition ever by an Indian company. The biggest overseas acquisition so far by an Indian company was from Tata steel in 2006 with its purchase of Corus for $12.2 billion. Reliance, however, did not disclose the bid figures but according to a senior merchant banker it would have to pay at least $12 billion.

In a statement RIL said that the company is reviewing a number of global opportunities for growth of its core business. ‘‘This review is ongoing and there can be no assurance of the outcome with respect to any of the opportunities under review, including with respect to LyondellBasell,”the statement said.

LyondellBasell said in a statement that Reliance’s offer "represents a potential alternative to the initial plan of reorganization," and it "will continue to work with all parties to design an approach that maximizes value for the company's creditors." The offer is nonbinding and is in addition to other nonbinding equity financing proposals LyondellBasell has received. The acquisition would help Reliance expand beyond its customer base in Asia into Europe and North America to become “a global player,” analyst Gregg Goodnight told Bloomberg in an interview.

LyondellBasell is the world's third-largest independent chemical company and is controlled by billionaire investor Len Blavatnik. Its products are used in gasoline, plastics, electronics, autos, paints and many other products. LyondellBasell was formed in 2008, when Basell International Holdings paid $12.7 billion for Houston-based Lyondell Chemical, taking on debt just as oil prices skyrocketed, squeezing profit margins at chemical makers.

As oil prices fell in the second half of last year, the recession undercut demand for chemical products, leading several affiliates and subsidiaries of Netherlands-based LyondellBasell to file for bankruptcy protection earlier this year.