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LyondellBasell Wants to Acquire Braskem Stake

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Jun. 18 2018, Updated 1:45 p.m. ET

LyondellBasell’s new acquisition plans

On June 15, LyondellBasell (LYB) said that it’s in talks with Odebrecht for a potential deal to acquire the controlling stake of Braskem (BAK). Currently, Odebrecht holds the controlling stake in Braskem. A few days ago, Braskem said that it isn’t engaged with LyondellBasell about the potential takeover.

A joint statement said, “Both LyondellBasell and Braskem share a strong culture of operational excellence and legacies of value-creating innovation. We believe that the potential combination of LyondellBasell’s and Braskem’s complementary strengths, product portfolios and operational footprints would create significant value for our shareholders, customers and employees.”

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If the deal goes through, LyondellBasell could gain significant market share for its products. LyondellBasell could fund the deal with cash and stock. At the end of the first quarter, LyondellBasell had cash in hand of $1.85 billion and another 1.04 billion in short-term investments. In the last 12 months, LyondellBasell’s free cash flow was ~4.0 billion. LyondellBasell is aggressively looking to acquire companies to fuel its growth. LyondellBasell is already in the process of completing the acquisition of A. Schulman (SHLM).

LyondellBasell’s stock performance

The day the news was announced, LyondellBasell gained 1.0%. However, the stock fell ~2.4% and closed at $115.32. Despite the decline, LyondellBasell’s stock price traded 4.8% above the 100-day moving average price of $110.06, which indicates the upward trend in the stock. On a year-to-date basis, the stock has gained 4.5%. Westlake Chemical (WLK) and Eastman Chemical (EMN) have gained 3.3% and 17.6%, respectively. LyondellBasell’s 14-day relative strength index of 54 indicates that the stock isn’t overbought or oversold.

Investors could hold LyondellBasell indirectly by investing in the Vanguard Materials ETF (VAW), which declined 1.4% for the week. VAW has invested 4.1% of its portfolio in LyondellBasell as of June 15.

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