From Standard & Poor's Equity Research
JP Morgan upgraded Lyondell Chemical (LYO) to overweight from neutral, after the company said July 20 that it discontinued plans to sell the Lyondell-Citgo Refining LP partnership that operates a Houston refinery.
Analyst Jeffrey Zekauskas believes Lyondell Chemical should be able to buy the 41.25% of the LCR refinery it doesn't own on attractive terms, as the company has the contractual right of first refusal on any sale of the stake owned by its partner, CITGO Refining. The analyst assumes the purchase price for the stake would be $2.0 billion to $2.3 billion. He believes the purchase could add $4.75-$8.75 to Lyondell's stock price "in short order." He also believes the deal should be accretive to 2007 earnings per share (EPS) by 90 cents to $1.00.