Tuesday, July 17, 2007
Basell to Buy Lyondell for $12 Billion
Basell has agreed to acquire Lyondell Chemical for $12.1 billion in an all cash transaction. Basell says it has offered Lyondell $48/share, a 20% premium to Lyondell’s July 16 closing price. The total value of the deal including debt is $19 billion, Basell says. Both companies say they have agreed to the deal. Lyondell is split into three businesses: ethylene, co-products, and derivatives; propylene oxide and related products; and refining. Those businesses will “complement and significantly strengthen Basell’s polyolefins business,” Basell says. Lyondell reported 2006 net income up 38%, to $735 million, on sales up 19%, to $22.2 billion. The combined company will have sales of about $34 billion. Access Industries, the parent company of Basell, expressed its interest in Lyondell in May 2007. Russian industrialist Leonard Blavatnik, who controls Access Industries, purchased the rights to buy an 8.3% stake in Lyondell in May. Lyondell is the latest company Basell has tried to buy. Basell offered to acquire General Electric’s GE Plastics business, but lost out to Sabic. Basell then offered to buy Huntsman, but was outbid by private equity firm Apollo Management earlier this month.
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2 comments:
Access says that the valuation on lyondell at $48 per share is an Ebitda multiple of 7, analysts put it at 6.1 times.
Either is an awful lot to pay for a struggling refinery and mostly ancient polyolefin technology and plant and a propylene oxide technology that is saddled with co-products that are in oversupply - styrene and MTBE.
We are in interesting times right now. There appears to be no limit to how much private equity can raise and spend to target companies, and free-spending emerging companies and private investors like Sabic Blavatnik will spend anything to establish a global position. One wonders what's next and how this will all turn out.
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