Reliance Industries Limited, the famous Indian conglomerate is contemplating the acquisition of the Rotterdam based petrochemical company LyondellBasell Industries (LBI). LyondellBasell had filed Bankruptcy in January this year under Chapter 11 Bankruptcy Protection for its US operations and for one of its European holdings. LyondellBasell is the third largest independent Chemical manufacturer in the world.

Reliance Industries Limited has witnessed a rise in the share prices after the news about its offer to acquire LyondellBasell Industries. The money offered is estimated to be $12 billion. The management proposes to arrange the funds by selling its Treasury stock and utilizing the Cash reserves. For the acquisition, the company does not intend to resort to borrowing as it does not want to increase debt in its Balance Sheet. LyondellBasell is estimated to have a post-acquisition debt equity ratio of not more than 0.75 times.

This large sized transaction of an entire-cash nature exhibits the confidence of the company of its preparedness to set its foot in the Global market. It is expected that there would be a growth of at least 5 percent in revenue post acquisition. The conservative assessments made reveal about 5 percent yearly growth.

Thus Reliance Industries Limited would accomplish its plans to expand its operations in the 19 countries where LyondellBasell is currently operating. The cash offer made by Reliance would enable LyondellBasell to exit bankruptcy. However the main barrier to this deal seems to exist in the form of opposition from the unsecured creditors of the  LBI.

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