Mukesh Ambani-controlled Reliance Industries Ltd, or RIL, has again sweetened its offer to take control of LyondellBasell Industries when it exits bankruptcy, boosting its valuation of the chemicals maker to $14.5 billion (Rs66,990 crore), according to a person familiar with the matter.
The offer, made over the weekend, would give Reliance a minority stake in Lyondell, but would give the Indian company super-voting power to control Lyondell’s board, this person said.
Unlike a previous offer Reliance made, the new offer would give some creditors a chance to get cash for their claims. Creditors could also choose to receive stock in the restructured Lyondell under the new offer. A third option would allow some creditors to receive stock and also purchase additional Lyondell stock in a rights offering.
Reliance’s latest offer comes after Lyondell rejected a previous sweetened bid that valued the company at around $13.5 billion. That offer had been increased from an initial November bid valuing Lyondell around $12 billion.
A Lyondell spokesman didn’t immediately respond to a request for comment. A Reliance spokesman declined to comment.
A deal between Reliance and Lyondell would create a mammoth energy and chemicals conglomerate with nearly $80 billion in combined revenue. Lyondell is the world’s third largest chemical maker and both companies have oil refining operations.
News of Reliance’s increased bid was first reported by Bloomberg.
But Reliance could still face an uphill battle in its overtures as creditors are already engaged in a separate restructuring plan to take Lyondell out of bankruptcy protection.
Under the current plan, lenders would take control of Lyondell in exchange for forgiving around $18 billion in debt.
Investors—including Apollo Management, Ares Management and Lyondell’s owner, Access Industries—also plan to “backstop” a $2.8 billion stock sale to take the company out of bankruptcy, buying up shares others choose not to purchase.
Lyondell’s restructuring plan has valued the company as high as $15.5 billion, meaning Reliance could still have work to do to persuade creditors its offer represents a viable alternative to the current reorganization plan.
Reliance, led by billionaire industrialist Mukesh Ambani, has been attempting to beat back that reorganization plan to grab Lyondell. The company has raised at least $2 billion in recent weeks for its acquisition war chest. India’s largest private company by market value, Reliance generates annual revenues of at least $28 billion.
Over the years, the company has built on its dominance in textiles by backwards integrating with polymers, plastics, and oil and gas exploration. Reliance operates one of the world’s largest oil refineries in Gujarat, a facility that can process 1.24 million barrels of crude per day.
Reliance sees major benefits from joining its petrochemical operations with Lyondell’s expertise in high-end plastics, according to people familiar with the company’s thinking. Reliance has been attempting to persuade Lyondell that a tie-up would create up to $1 billion in cost savings from synergies between the two companies, the person familiar with the situation said.
As part of its latest offer, Reliance would backstop the stock sale under consideration in Lyondell’s current plan, an offer it made in its previous sweetened bid.
Lyondell filed for bankruptcy a little more than a year ago amid a cash crunch and falling sales. A US bankruptcy court will soon hold a hearing on Lyondell’s reorganization plan.
The move comes as Indian companies are revving up for big-ticket acquisitions overseas in sectors ranging from energy to entertainment.
The country’s largest cellphone company, Bharti Airtel Ltd, is in exclusive talks until 25 March with Kuwaiti operator Zain to buy most of the company’s Africa assets.
Reliance-Anil Dhirubhai Ambani Group, a separate company from Reliance Industries, recently submitted a preliminary offer for debt-laden movie studio Metro-Goldwyn-Mayer Inc.
Reliance, in addition to pursuing Lyondell, has also expressed interest in acquiring Canadian firm Value Creation Inc., which controls oil sands in the western province of Alberta, according to people familiar with the matter.