22 November 2009
NEW DELHI: The country’s largest company, Reliance Industries (RIL) has offered to buy a controlling stake in the world’s third largest chemical company LyondellBasell, RIL announced on Saturday.
LyondellBasell filed for bankruptcy in the US in January. RIL did not disclose how much it had bid but a senior merchant banker said it would have to pay at least $ 12 billion. This is the gap between LyondellBasell’s assets and liabilities.
But RIL might have to pay more, making this the biggest acquisition ever by an Indian company. Till now, the biggest overseas acquisition was Tata Steel’s 2006 purchase of Corus for $ 12.2 billion. In 2008, LyondellBasell’s market capitalisation was $ 58 billion, while its earning before interest, depreciation and amortisation (EBIDTA) was $ 1 billion.
A banker said that RIL would have to make a fresh infusion of capital in LyondellBasell in order to pay its debtors. It’s learnt that RIL has already offered to acquire fresh shares in the company to infuse capital.
The acquisition will take RIL higher up the Fortune 500 list, where it is currently ranked 264th. 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.
The acquisition would make RIL one of the world’s largest petrochemical companies and it will also be able to penetrate developed markets.
LyondellBasell is headquartered in the Netherlands but based in the US. It was created when Basell Polyolefins merged with Lyondell Chemical Company in December 2007. It is one of the worlds largest polymers, petrochemicals and fuels companies. It filed for bankruptcy in the US under Chapter 11 because of the global financial crisis. A LyondellBasell confirmed it had “received a preliminary non-binding offer from Reliance Industries Limited.” E.T