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LyondellBasell Enters Into Joint Venture Deal With Sasol

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LyondellBasell Industries N.V. (LYB - Free Report) inked a definitive agreement with Sasol to form a 50-50 joint venture (JV). Through the JV, LyondellBasell will acquire 50% of Sasol's 1.5 MM ton ethane cracker, 0.9 MM ton low and linear-low density polyethylene plants along with associated infrastructure for $2 billion. The JV will be known as Louisiana Integrated PolyEthylene JV LLC.

Per the agreement, both partners will provide pro-rata shares of ethane feedstocks. The JV partners will also offtake pro-rata shares of polyethylene products and cracker at cost. Further, LyondellBasell stated that it will operate the U.S. Base Chemicals assets.

The deal, which is subject to customary closing conditions, is expected to close by the end of 2020.

Benefits of the JV

Per LyondellBasell, the newly-constructed assets of the JV are strategically located on the U.S. Gulf Coast. It has access to storage and logistics infrastructure as well as low-cost feedstock. LyondellBasell's investment in the JV enables it to expand in a core business area leveraging operational and commercial strengths. LyondellBasell is also expected to realize immediate returns from investing in these assets and eliminate customary construction risks.

Price Performance

Shares of LyondellBasell have lost 10.4% in the past year against the industry’s 4.5% rise.

Zacks Rank & Other Key Picks

LyondellBasell currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Brenntag AG (BNTGY - Free Report) , Pretium Resources, Inc. (PVG - Free Report) and Yamana Gold Inc. (AUY - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Brenntag has an expected earnings growth rate of 2.9% for 2020. The company’s shares have surged 37.3% in the past year.

Pretium Resources has an expected earnings growth rate of 20% for 2020. Its shares have returned 8.5% in the past year.

Yamana has an expected earnings growth rate of 84.6% for 2020. The company’s shares have gained 75.1% in the past year.

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