Reliance shares up as Lyondell bid seen rejected

MUMBAI Wed Mar 3, 2010 9:31pm IST

People walk past the Bombay Stock Exchange (BSE) building in Mumbai in this January 2009 file photo. REUTERS/Punit Paranjpe

People walk past the Bombay Stock Exchange (BSE) building in Mumbai in this January 2009 file photo.

Credit: Reuters/Punit Paranjpe

Related Topics

MUMBAI (Reuters) - Reliance Industries shares rose Wednesday following reports that the Indian energy company's $14.5 billion offer for bankrupt petrochemicals firm LyondellBasell had been rejected.

Investors had feared Reliance would overpay.

Reliance does not plan to raise its bid, a source familiar with the matter told Reuters on Wednesday. Reliance declined to comment.

The Indian company, controlled by billionaire Mukesh Ambani, has made no secret of its overseas ambitions and has raised a war chest for potential deals by selling $2 billion in stock in recent months.

A person familiar with the matter told Reuters on Tuesday that Luxembourg-headquartered Lyondell had rejected the Reliance offer.

This could mean Reliance, India's largest-listed conglomerate, whose interests include petrochemicals, refining, oil and gas and retail, will look at other overseas options.

It made a $2 billion offer for private Canadian oil-sands firm Value Creation Inc, according to media reports, although three people familiar with Reliance's thinking have said the Calgary, Alberta-based firm may not be an ideal target.

Other possible targets include assets owned by U.S.-based Valero Energy and Sunoco, energy assets belonging to ConocoPhillips, and refineries in Europe that are up for sale, bankers have said.

"While LyondellBasell did offer strategic merit for Reliance, we believe the bid not going through is a better outcome, as it saves Reliance from getting drawn into a bidding war and thus potentially overpaying for the assets," Goldman Sachs analyst Nilesh Banerjee said in a note.

Reliance shares closed up 3.9 percent at 1,021.95 rupees, while the Mumbai market was up 1.4 percent. Reliance shares rose as much as 4.2 percent to 1,024.55 rupees during the trading session.

EARLY CHEER

In November, investors cheered Reliance's Lyondell bid, then valuing the target at about $12 billion, as a potential bargain.

A deal would enhance Reliance's presence in major markets such as the United States and Europe and catapult it into the ranks of top global chemicals makers such as Saudi Arabia's SABIC, Germany's BASF and Dow Chemical Co.

Reliance has since raised its offer twice, sources have said, with chances for success clouded by the prospect that senior creditors such as Apollo Management might take a loss at the price Reliance proposed and could gain more from an independent Lyondell.

At the current offer, Reliance is valuing Lyondell at 10 times 2010 forecast EBITDA. Dow Chemical trades at a multiple of just over eight.

Lyondell adviser Evercore has put a $13.5 billion to $15.5 billion enterprise value range on the company.

Goldman's Banerjee said in his note that it would be better for Reliance to target assets in the exploration and production sector.

A new disclosure statement about Lyondell's proposed plan of reorganization is expected to be filed with the U.S. bankruptcy court in New York "imminently," company spokesman David Harpole said on Wednesday. It had not been filed as of 10:11 a.m. in New York (1511 GMT).

The case is In re: Lyondell Chemical Co, U.S. Bankruptcy Court, Southern District of New York, No. 09-10023.

(Reporting by Pratish Narayanan; Additional reporting by Chelsea Emery in New York; Editing by Ranjit Gangadharan and John Wallace)

FILED UNDER:

Reuters Showcase

GDP Growth

GDP Growth

India revises up 2013/14 GDP growth to 6.9 percent.  Full Article 

Pharma Deal

Pharma Deal

Sun Pharmaceutical wins U.S. approval to buy Ranbaxy  Full Article 

Adani Restructuring

Adani Restructuring

Adani hives off power, ports businesses to boost growth.  Full Article 

Bank of Baroda

Bank of Baroda

Q3 net profit down 69 pct on higher provisions  Full Article 

Trading Fees

Trading Fees

BSE slashes fees in FX derivatives battle with NSE  Full Article 

SpiceJet Turnaround

SpiceJet Turnaround

SpiceJet board approves up to $243 mln share sale plan  Full Article 

Currency Market

Currency Market

RBI urges companies to hedge FX exposure  Full Article 

Banking Sector

Banking Sector

Banks say no room to cut lending rates, thwarting RBI easing  Full Article 

Reuters Poll

Reuters Poll

RBI seen holding rates steady on Tuesday, minority of analysts expect cut  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage