Access Industries, promoted by Russian-born billionaire Len Blavatnik, feels that the US$12 bln at which RIL has valued LyondellBasell is too low, and lacks merit. It seems that Reliance Industries (RIL) will have to rethinks its initial offer, as it’s bid fails to factor in the potential turnaround gains of the bankrupt petrochemicals-maker.
Since secured creditors like Apollo will make losses if the deal were to go through at RIL’s initial offer, the present management and stakeholders continue to resist the offer. Any reasonable bid will have to go beyond the present value of the company, as LyondellBasell is not a badly-performing asset. It has inherent value and can see a complete turnaround in 2-3 years, and any bid has to take that into account. The restructuring plan submitted by the current management, including Access Industries, has proposed a US$2.8 bln rights offer to infuse funds into the cash-strapped company. Meanwhile, RIL is working on a formal financial bid for the Dutch-headquartered company, which it plans to submit since the due diligence has now been completed.