* Lyondell board rejects Reliance bid - source
* Investors view latest offer as expensive
* Reliance might look at other overseas options
(Updates with comments from source, adds background)
MUMBAI/NEW YORK, March 2 LyondellBasell [ACCEIN.UL] has rejected an offer from Reliance Industries' (RELI.BO) that values the bankrupt petrochemicals group at $14.5 billion, a person familiar with the matter said on Tuesday.
This is the third advance that Lyondell's board has rejected from Reliance over the past year in a decision that could leave the Indian energy group having to look elsewhere for takeover targets.
In rejecting the offer, Lyondell did not give any details about whether further negotiations would be fruitful, this person said, declining to be named because the negotiations are not public.
Reliance, controlled by India's richest man, Mukesh Ambani, has said his company plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions.
It was not clear whether Reliance, which has raised a war chest for deals by selling $2 billion of stock in recent months, would continue its pursuit of the petrochemicals maker. A Reliance spokesman declined to comment.
Lyondell spokesman David Harpole also declined to comment but said a new disclosure statement about the company's current proposed reorganization plan will be filed with a United States court imminently.
A creditor group led by U.S. private equity firm Apollo Management, which is controlling Lyondell's bankruptcy process in the United States, was expected to file a reorganization plan on Monday. That plan is intended to lead Lyondell out of bankruptcy.
Shares of Reliance, India's most valuable listed company with a market value of about $70 billion, closed 0.6 percent higher on Tuesday, underperforming the 2.1 percent gain in the benchmark index.
"Reliance, being the size it is, will be looking at other options overseas even if this bid fails, and sooner than later, something else will come up," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services.
A deal would greatly enhance Reliance's presence in major markets in the United States and Europe and place it in the ranks of top global chemical makers such as Saudi Arabia's SABIC, Germany's BASF and Dow Chemical.
"In the short term I will be happy if the bid fails because the acquisition risk has been removed and Reliance's profits will remain unaffected," Rawal said.
"But from a longer-term perspective, I am sad because the company could have gained a lot of synergies from this acquisition over the next few years."
'OFFER RAISED TWICE'
Reliance, with interests in petrochemicals, refining, oil and gas exploration and retail, has been trying to buy Luxembourg-headquartered Lyondell since November, when it made a bid valuing the target at about $12 billion.
Reliance has since raised its offer twice, sources familiar with the situation have said, but the chances of success have been clouded by the prospect that senior creditors such as Apollo may take a loss at the price Reliance has proposed and gain more from an independent Lyondell.
LyondellBasell, which was forced into bankruptcy just over a year ago amid a cash crisis, said last month it had reached a settlement with creditors over a lawsuit stemming from its 2007 leveraged buyout, paving the way for the chemical maker to exit bankruptcy.
Reliance is being advised by boutique U.S. investment banking firm Perella Weinberg Partners on the Lyondell bid, while Lyondell is being advised by investment bank Evercore and law firm Cadwalader Wickersham & Taft on its bankruptcy.
Evercore has placed a $13.5 billion to $15.5 billion enterprise value on LyondellBasell as part of its bankruptcy work, according to court papers. (Additional reporting by Sumeet Chatterjee and Aaron Gray-Block; Editing by Anshuman Daga, Greg Mahlich and Steve Orlofsky)