HOUSTON — Dutch chemicals company Basell and U.S. competitor Lyondell Chemical Co. said Tuesday they'll combine in a $12.1 billion cash deal to create one of the world's largest chemical companies. It would mark the third big combination in that industry in recent months.
Just last week, Basell walked away from a $5.6 billion deal to buy Salt Lake-based chemicals maker Huntsman Corp. after it was outbid by nearly $1 billion by private equity firm Apollo Management LP. Some analysts speculated that deal fell apart because Basell was looking at Lyondell.
"This combination ... creates one of the top chemical companies in the world," Len Blavatnik, the Russian-born, Harvard-educated industrialist whose firm controls Basell, said in a statement.
Shares of Lyondell shot up more than 17 percent to close at a 52-week high of $47.05, gaining $6.93. The shares had traded in a range of $20.99 to $41.30 in the past year.
Basell said it would pay $48 per share in cash for Lyondell, a 20 percent premium to Lyondell's closing share price Monday. Lyondell had 252.9 million shares outstanding as of March 31. The two companies pegged the total value of the deal, including debt, at $19 billion.
Lyondell, based in Houston, produces ethylene, a crucial precursor to a range of other chemicals, as well as propylene oxide, which is also used in producing a variety of chemical products. The company also operates a refining business.
Basell focuses on polyolefins, common types of plastic. It's owned by Blavatnik's U.S.-based Access Industries, a privately held industrial holding company with investments in the United States, Europe and elsewhere.
Wall Street analysts had conflicting takes on the combination.
J.P. Morgan Securities analyst Jeffrey Zekauskas said he'd continue to hold Lyondell shares and didn't rule out the possibility of a higher bid by an integrated oil company or foreign energy company.
"We speculate that a strategic bidder could value the refining and petrochemical assets of (Lyondell) at $50 a share or above," Zekauskas said in a research note.
Bank of America Securities analyst Kevin McCarthy said absent any meaningful antitrust concerns, he expects the deal to close. In a research note, McCarthy called the combination a good strategic fit, noting that both companies compete in polyethylene and that Access' market presence in Europe could complement Lyondell's position as the second-largest ethylene producer and the third-largest polyethylene producer in North America.
The combined Basell-Lyondell would have annual revenue of more than $34 billion and more than 15,000 employees around the world, the two companies said. By comparison, Dow Chemical Co., the largest U.S. chemical company and second globally behind Germany's BASF AG, had sales last year of roughly $50 billion.
The Basell-Lyondell deal was unanimously approved by the boards of both companies, who said they expect it to close "in the next several months," pending various regulatory and shareholder approvals.
Blavatnik, who is now a U.S. citizen, serves as a director of many companies in the Access portfolio, including Basell, the Russian oil company TNK-BP and Warner Music Group Corp., his representatives said.