State-owned company looks for partner to invest in new projects in Brazil beyond Braskem
Petrobras, with the support of the Brazilian Development Bank (BNDES), has been talking to potential buyers of Braskem about other investments in the petrochemical sector in Brazil, Valor found. In this format, the asset management firm Apollo, and the Abu Dhabi National Oil Company (ADNOC), which have joined forces and made a formal proposal for the petrochemical company, gain strength to move forward in the deal, according to two sources.
Negotiations are still informal and the discussions on potential projects that could be carried out in partnership have not been defined, but the state-owned company has made it clear to these persons that it is looking for partners to expand its presence in the industry beyond Braskem. Since the government change, Petrobras has reiterated that the petrochemical sector is important for its business and that it has no intention of selling its stake in the company. The state-run company has declined to take an official position on the issue as it is still discussing its strategic plan.
At this point, the association of Apollo and ADNOC is suitable because it has a financial partner (the U.S. asset manager) and a strategic one with experience in petrochemical operations (the Arab company), said a person familiar with the matter. Regarding the Unipar proposal, some creditor banks believe that Frank Geyer Abubakir’s company would not have the financial strength in the long term to make a consolidation in the sector.
Apollo and ADNOC have expressed their commitment to the growth of Braskem and the Brazilian petrochemical industry. Petrobras itself announced to the market that it had received a letter from the companies informing it of the non-binding offer for Braskem and their interest in discussing “potential business” with the state-owned company.
Apollo and ADNOC remain engaged and have already sent both Novonor (formerly Odebrecht) and Braskem a list of requests for the second phase of due diligence on the company. Before joining ADNOC, Apollo had already carried out an initial financial audit on the Brazilian petrochemical company. Now comes the most complex stage: the legal one.
Furthermore, according to people familiar with the matter, Apollo and ADNOC have signaled throughout the process that they want to work with Petrobras in the position of a strategic partner of Petrobras in Braskem and do not want to close a deal that does not work for all parties, including the oil company. These talks have already involved heads of state and ministers, including Fernando Haddad (Finance).
The problem for potential interested parties in Braskem is mainly in the state of Alagoas. Total environmental liability is a critical issue for those who are evaluating the company. So far, the petrochemical company’s bill for land subsidence in Maceió’s neighborhoods exceeds R$13 billion and, according to the company, is expected to increase by another R$1.7 billion.
Another point is the ongoing down cycle in the petrochemical sector, which is unfavorable for sellers. The prices of the main resins (PE and PP) continue to fall, putting pressure on spreads (margins), and the scenario is not expected to improve until 2024.
Novonor’s creditor banks, with almost R$15 billion of debt guaranteed by Braskem shares, want to keep formal proposals on the table and some financial institutions are not willing to have exclusivity with any company, which could soon remove Unipar from the list.
The sale of Braskem has dragged on in recent years — the company received an offer from LyondellBasell in 2018, but negotiations broke down the following year when the severity of the Alagoas problem became known. Today, for Novonor, the best proposal put on the table is that of Unipar, since the family would get 4% of the business, the crown jewel of the group. Petrobras has the right of first refusal on the partner’s share. But there is no rush to sell the company at any price, according to sources.
There are those in the industry who are betting that Petrobras will be able to exercise its right and buy its partner’s share.
Unipar’s firm offer expires on Saturday. It seems that the company may not renew the offer, since Mr. Abubakir is seeking exclusivity to negotiate and follow the “due diligence.” However, sources close to the negotiations say that the group is willing to be Petrobras’ partner in other petrochemical projects if it does not proceed with the offer for Braskem, and there have already been approaches in this direction.
Oil giant, ADNOC has shown an appetite for acquisitions in the global chemicals and plastics chain. Last year, it invested $3.9 billion in Austria’s OMV AG, buying shares previously owned by Mubadala. In June, it made a $12 billion bid for Covestro that was rejected, according to Bloomberg. The U.S agency also reported this week that the state-owned United Arab Emirates and OMV are in talks to combine Borouge and Borealis to create a global chemicals and plastics company valued at more than $30 billion.
Apollo, ADNOC, BNDES, and Unipar declined to comment. Petrobras did not reply to requests for comment.
*Por Stella Fontes, Mônica Scaramuzzo — São Paulo
Source: Valor International