Dalal Street seems to have given its thumbs up to the mega acquisition plan by Reliance Industries. Shares of Reliance Industries on Monday gained 3.31 per cent to close at a one-month high of Rs 2,195.50 on the Bombay Stock Exchange after RIL said it has made an offer to acquire bankrupt LyondellBasell. RIL jumped 4 per cent to an intra-day high of Rs 2,205. The takeover of LyondellBasell will accelerate Reliance Industries into the elite league of companies worldwide that have a market capitalisation of more than $100 billion (Rs 460,000 crore). The combined entity will have potential consolidated revenue of more than $85 billion,transcontinental presence across more than 60 facilities and 60,000 people. Reliance Industries currently has a market value of about $75 billion. The rise in RIL value pushed the Sensex up by 158 points to 17,180.18 The company on Saturday said it has made an all-cash offer (worth aroound $12 billion) for a controlling interest in the worlds third largest petro-chemical company LyondellBasell that has a market valuation of $55 billion. Indian companies are on the hunt for bargain basement prices overseas, said Bundeep Singh Rangar,Chairman of IndusView,the India-focused cross-border advisory firm in London. This is a good time for them to buy market share and customers in the West at fraction of what they would have paid a couple of years ago. Analysts said the acquisition,if successful,would benefit the core business of RIL and it would add to its market capitalisation. We would view the acquisition as positive if the total enterprise value remains below $12 billion. RIL is adequately funded with $4 billion in cash and $8 billion in treasury stock,besides access to extra leverage, CLSA said in its research report. The acquisition can be value accretive for RIL,Citi said in a report,adding that even as the acquisition would add to the net debt for FY11 of RIL,but within manageable limits. However,rating agency Moodys said the proposed acquisition may put downward pressure on the credit rating of Reliance Industries,but it will wait for more details on the deal before taking any action. Depending on the total size of the deal and whether or not the acquisition is to be majority debt funded,it could result in downward pressure on RILs current Baa2 (two notches above the speculative grade) credit rating, Moodys said in a statement. The agency,however,added that it is not taking any action at this stage since the offer is preliminary and non-binding and subject to due diligence. The acquisition of LyondellBasell is expected to be India's biggest cross-border deal this year,on par with the acquisition of the UKs top steel maker Corus Group Plc for $12 billion by Indias Tata Steel Ltd in January 2007. Indian M&A activities peaked in 2007 with more than $51 billion worth of transactions. Goldman Sachs said that with no major projects lined up to consume the cash flow in the next three fiscals,RIL could pursue inorganic growth.
