Lyondell Is Out of Bankruptcy

A little follow up: LyondellBasell has emerged from bankruptcy on Friday as planned. It has also filed a Form 10 with the SEC, a document that sheds some more light on what the new LyondellBasell will look like. From that document, we learn that Apollo Management will have the largest stake in the company with 25% of shares. LyondellBasell’s former owner Access Industries will have 7% and Ares Management will have 7%. The Royal Bank of Scotland will have an unspecified number of shares, but they will amount to more than a 5% interest. In addition, three of the five directors disclosed thus far have an Apollo pedigree, including one of Apollo’s founders, Josh Harris. The other two directors come from Access and Ares. Apollo’s other major projects in the chemicals world are the former GE Silicones unit Momentive Performance Materials and the specialty chemicals maker Hexion. I would guess that there wouldn’t be a merger between Lyondell and one of these two firms because the synergies, outside of perhaps administrative costs, would be limited. That said, the idea of combining LyondellBasell has been floated before. LyondellBasell tried to buy Huntsman before Hexion stepped in with a “better” offer that wasn’t, in the end, consummated. (Comical understatement in the last part of the preceding sentence). But LyondellBasell is the second largest propylene oxide maker in the world, after Dow. Huntsman makes propylene oxide and other polyurethane raw materials like MDI. There isn’t nearly such an overlap between Hexion and LyondellBasell. I am actually more curious about what the relationship might be with another firm that Apollo has a large stake in: Berry Plastics. That packaging maker buys billions of lbs of the kinds of plastics that LyondellBasell makes. Downstream integration is common in the vinyls world with many PVC makers also producing PVC pipe. In polyolefins, you hardly see it outside of biaxially oriented polypropylene, the plastic film that potato chip bags are made out of. Another neat observation from the document: Four out of seven of LyondellBasell’s executive officers, including CEO Jim Gallogly, came from Chevron Phillips. Incidentally, Gallogly, who has experience founding global petrochemical companies, will end up with a 1% stake in the firm.

Author: Alex Tullo

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