Blavatnik gets right to buy Lyondell stake

NEW YORK (Reuters) - Billionaire investor Leonard Blavatnik signed an agreement giving him the right to buy 8.3 percent of Lyondell Chemical Co. LYO.N , driving the company's shares up as much as 15 percent on Friday on takeover speculation.

Blavatnik's AI Chemical Investments made a forward contract agreement with Merrill Lynch & Co. Inc. MER.N, giving the company the right to buy 20,990,070 shares of Lyondell for $674.05 million, or $32.113 per share, according to a regulatory filing on Friday morning.

Lyondell shares soared to $38.23 -- an all-time high -- in early trading before giving up some of those gains. They were up about 11 percent in afternoon trading.

"Mr. Blavatnik will continue to evaluate his right to acquire a stake in Lyondell. Any future actions in regard to any investment would depend on many factors, including developments in the petrochemical industry, Lyondell and general market conditions," a spokesman for AI Chemical said.

The spokesman described the stake as being "strategic."

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 (BP.L) Russian oil affiliate TNK-BP Holding, aluminum producer UC RUSAL and Warner Music Group Corp. (WMG.N). AI Chemical is a newly formed unit of Access Industries.

On the latest Forbes billionaires list, Russian-born Blavatnik ranked 6th among the top 10 richest New Yorkers, with more than $7 billion to his name.

"We believe the transaction puts Lyondell in play," Bank of America analyst Kevin McCarthy said in a research note.

McCarthy said that Lyondell produces propylene monomer -- the key building block for Basell's largest product, polypropylene.

Both companies make polyethylene, a plastic used in consumer products and packaging. McCarthy said that their positions in this market could complement each other.

Blavatnik bought Basell in 2005 for 4.4 billion euros ($5.7 billion) in the largest ever leveraged buyout in the chemical industry, according to Bank of America.

If he buys the entire Lyondell stake, Blavatnik would be Lyondell's third largest shareholder.

Lyondell is the third-largest independent, publicly traded chemical company in the United States. It makes chemicals and plastics, as well as refining of heavy, high-sulfur crude oil and producing fuel products.

In February, it agreed to sell its titanium dioxide pigment business to an affiliate of Saudi Arabia's National Industrialization Co. for about $1.2 billion, after deciding last year that it would rather invest in its refineries.

Occidental Petroleum Corp. (OXY.N) said earlier Friday that it plans to sell its 8.3 percent interest in Lyondell, or just under 21 million shares.

The oil company said it sold about 7 million shares to a single buyer in a private deal for more than $32 a share.

Occidental said it entered into an agreement that will allow it to receive a similar price for its remaining 14 million shares and intends to sell those shares in the open market.

Occidental expects to pull in about $520 million in after-tax proceeds and record a net gain of about $200 million from the sales. The company had already sold off around 10 million Lyondell shares late last year.

Lyondell shares were up $3.52 to $36.59 on the New York Stock Exchange.

The company could not immediately be reached for comment.