Chemical Maker Basell to Buy Lyondell for $12.72B

NEW YORK – Chemicals and plastics maker Basell said Tuesday it would buy Lyondell Chemical Co. (LYO) for about $12.72 billion, continuing a wave of consolidation in the chemical industry and giving Basell access to a key raw material and Lyondell's refining capacity.

Dutch-based Basell is owned by billionaire industrialist Len Blavatnik's Access Industries, which has been on the prowl for acquisitions in the chemical sector and recently lost out in bids to acquire Huntsman Corp. (HUN) and General Electric Co.'s (GE) GE Plastics.

The all-cash deal for $48 a share offers shareholders of Lyondell a 19.6 percent premium to Monday's closing price of $40.12 and a 45 percent premium to Lyondell's closing price on May 10, when Access acquired the right to buy an 8 percent stake in Lyondell and said it might seek to buy the whole company.

Houston-based Lyondell produces propylene monomer -- the key building block for Basell's largest product, polypropylene, which is used in fibers and plastic containers.

The offer values Lyondell at about $12.72 billion and also involves the assumption of about $6.5 billion of debt, said a spokesman for Basell.

Shares of Lyondell were up $6.66 or 16.6 percent to $46.78 in afternoon trading on the New York Stock Exchange.

Some analysts like JPMorgan's Jeffrey Zekauskas concurred that a rival bid for Lyondell could emerge from an integrated oil company or a major foreign energy company.

"We speculate that a strategic bidder could value the refining and petrochemical assets of LYO at $50 per share or above," said Zekauskas.

The Lyondell-Basell deal is the latest in a wave of acquisitions that the sector has witnessed. Apollo Management's Hexion Specialty Chemicals last week agreed to buy Huntsman for $6.5 billion, beating a $5.6 billion bid from Basell.

In May, General Electric sold its plastics unit to Saudi Basic Industries Corp. for $11.6 billion, and earlier this month Dow Chemical Co. (DOW) completed its acquisition Bayer AG's cellulosics business.

"The immediate impact of this deal, coupled with the Apollo-HUN deal, in our opinion, will be to buoy chemical company valuations even further," said HSBC analyst Hassan Ahmed in a note to investors.

Access is expected to exercise its right to buy 8.3 percent of Lyondell shares, for $674 million, or $32.11 a share, according to sources familiar with the situation.

Blavatnik is the founder of Access Industries -- a privately held, U.S.-based industrial group which counts among its investments plastics company Basell Holdings BV, BP Plc's Russian oil affiliate TNK-BP Holding, aluminum producer UC RUSAL and Warner Music Group Corp. (WMG).

The Lyondell transaction has been unanimously approved by the boards of directors of both Basell and Lyondell.

Basell and Lyondell together would have had combined 2006 revenues of about $34 billion and about 15,000 employees, according to a joint statement.

The deal is expected to close within the next several months and is not subject to the arrangement of financing. Deutsche Bank acted as adviser for Lyondell, while Basell was advised by Citigroup and Merrill Lynch.