THE proposed acquisition of Lyondell-Basell by Reliance Industries can mark a mega-leap for the hitherto India-centred behemoth.
The acquisition, if it goes through, will not only expand the company’s presence significantly in the global petrochemicals market, but will also give it an entry into the technologically superior speciality chemicals. Similar to what RIL is in India, Lyondell-Basell is a refinery to polymers-tochemicals major in Europe and the US, but has also progressed into the advanced materials business through extensive R&D efforts.
LyondellBasell reported an operating loss of $5.9 billion for the year ended December 2008, and its networth turning negative. Although its operations generated over $1-billion cash during the year, it had debt worth $22.9 billion payable within the year 2009, forcing it to take refuge under Chapter 11.
RIL will gain from Lyondell-Basell’s global leadership in polypropylene and its derivative products. It represents 14% of the world’s polypropylene capacity. Its two refineries with a refining capacity of 373,000 barrels per day can add nearly 30% to RIL’s existing refining capacity in India. It is also the owner of several proprietary technologies and catalysts used in the production of downstream petrochemicals such as propylene oxide.
The exact value of the deal or the stake that RIL proposes to buy in LyondellBasell is yet not known, however, it is likely to be an all-cash deal.
As on September 30, 2009, RIL had cash and cash equivalents of Rs 19,421 crore ($4 billion). An additional $650 million were raised by its subsidiary when it sold treasury shares in September this year. This subsidiary continues to hold another 8.96 crore shares in the company valued at over $4 billion. RIL’s net debt was approximately Rs 51,000 crore resulting in a net debt-to-equity ratio of 0.42. If RIL decides to raise this ratio to 1, it can borrow nearly Rs 70,000 crore more ($14.9 billion). Investors must, however, bear in mind that the actual acquisition could take months to fructify and the benefits may not accrue in the short run.
The acquisition, if it goes through, will not only expand the company’s presence significantly in the global petrochemicals market, but will also give it an entry into the technologically superior speciality chemicals. Similar to what RIL is in India, Lyondell-Basell is a refinery to polymers-tochemicals major in Europe and the US, but has also progressed into the advanced materials business through extensive R&D efforts.
LyondellBasell reported an operating loss of $5.9 billion for the year ended December 2008, and its networth turning negative. Although its operations generated over $1-billion cash during the year, it had debt worth $22.9 billion payable within the year 2009, forcing it to take refuge under Chapter 11.
RIL will gain from Lyondell-Basell’s global leadership in polypropylene and its derivative products. It represents 14% of the world’s polypropylene capacity. Its two refineries with a refining capacity of 373,000 barrels per day can add nearly 30% to RIL’s existing refining capacity in India. It is also the owner of several proprietary technologies and catalysts used in the production of downstream petrochemicals such as propylene oxide.
The exact value of the deal or the stake that RIL proposes to buy in LyondellBasell is yet not known, however, it is likely to be an all-cash deal.
As on September 30, 2009, RIL had cash and cash equivalents of Rs 19,421 crore ($4 billion). An additional $650 million were raised by its subsidiary when it sold treasury shares in September this year. This subsidiary continues to hold another 8.96 crore shares in the company valued at over $4 billion. RIL’s net debt was approximately Rs 51,000 crore resulting in a net debt-to-equity ratio of 0.42. If RIL decides to raise this ratio to 1, it can borrow nearly Rs 70,000 crore more ($14.9 billion). Investors must, however, bear in mind that the actual acquisition could take months to fructify and the benefits may not accrue in the short run.
No comments:
Post a Comment