Operation may suffer new setback as Mitsui rejects format proposed for deal
06/22/2022
On the eve of decision of the antitrust regulator CADE on the acquisition of Petrobras’s 51% stake in Gaspetro by Cosan’s Compass, the R$2 billion operation may suffer new setbacks.
Valor has learned that Mitsui Gás e Energia, the state-owned company’s partner in Gaspetro, rejects the most recent format proposed for the deal. Compass would sell up to 12 of the 18 distribution companies in which Gaspetro holds a minority stake. Mitsui has also indicated that it is likely to exercise its right of first refusal.
Compass informed in March that it would not keep all the distributors, in a move to seek the approval of the CADE. In the same month, the General Superintendence of the antitrust body approved the deal without restrictions. According to a source familiar with the group, the company has already committed to sell seven distributors to one group and five to another.
In addition to Mitsui, local distributors have also signaled that they may exercise this right in relation to Gaspetro’s stake, should Compass decides to sell it after the acquisition.
Mitsui informed the antitrust agency that it had no interest in buying the Petrobras stake in August last year. However, after the change in the proposal of Compass, it appealed to the rapporteur of the case in CADE, Luiz Hoffman, asking that the right of first refusal can be evoked because the deal was modified. Under the new format, it jeopardizes its business strategy, the company said.
In the e-mail message, which is public but contains restricted excerpts, Mitsui asks that this right can be exercised by any partner of the local distribution companies. “At that time [of the option not to exercise the right of first refusal], it was unthinkable that the sale by Petrobras of its equity interest in Gaspetro to a third party — in this case, to Compass — could/would hinder the investments made by Mitsui Gás over the years,” it says.
If the CADE approves the deals, Compass would hold 80% of the natural gas distribution market, which increases market concentration, sources say. In addition to Gaspetro, the company owned by Cosan bought Sulgás, a gas distributor in Rio Grande do Sul, in a privatization auction held in October, for R$927.79 million.
Mitsui has direct participation of 41.5% in eight distributors: Algás (Alagoas), Bahiagás (Bahia), Cegás (Ceará), SCGás (Santa Catarina), Copergás (Pernambuco), PBGás (Paraíba) and Sergás (Sergipe), besides other participations. According to one source, in case Mitsui exercises its preference right, the result will be market concentration, giving rise to a monopoly in natural gas distribution.
Last week, Mitsui Gás CEO Tadaharu Shiroyama met distributors in Ceará and Pernambuco to talk about investments, which reinforced the perception that the Japanese partner would be willing to keep Gaspetro’s slice.
Mitsui Gás e Energia did not immediately reply to a request for comment. Compass and Petrobras declined to comment.
For those who follow the matter, the fact that Mitsui Gas will take Petrobras’s share in Gaspetro instead of Compass would be a “lesser evil,” since the Japanese company has business only in gas distribution while Cosan’s subsidiary has verticalized operations, and is no longer independent as recommended by the term of cessation of conduct signed between the CADE and Petrobras. Compass operates in the gas trading market, import infrastructure, with a liquefied natural gas (LNG) terminal under implementation, and transportation.
Compass faces resistance from associations of sectors with direct operations in the natural gas market, which intend to convince the CADE that the approval could pave the way for the formation of a monopoly in natural gas distribution.
Associations interested in the matter filed appeals against the deal. This was the case of the Brazilian Association of Large Industrial Energy Consumers and Free Consumers (Abrace), the Association of Gas Pipeline Transportation Companies (Atgás), the Brazilian Association of Oil and Gas Exploration and Production Companies (Abep) and the Brazilian Glass Industries Association (Abividro). On Tuesday, the Brazilian Association of Independent Oil and Gas Producers (ABPIP) filed a manifesto with the CADE against the acquisition by Compass, aligning itself to the other associations.
Even the National Petroleum Agency (ANP) appealed at the end of March against the deal. In the appeal, the agency said Compass would become the controlling shareholder of Gaspetro, inheriting all the prerogatives that previously belonged to the oil company, including the appointment of commercial directors of the distributors, from the respective shareholders’ agreements – a situation that would imply open conflicts of interest.
Despite the effort, the purchase must be approved with “cosmetic restrictions,” according to the evaluation of sources that follow the case, with a pessimistic tone in relation to the outcome of the deal. For these sources, who spoke on the condition of anonymity, the assessment is that any restriction imposed by the CADE will not mitigate the effects of the deal. The sale of the participation in Gaspetro, inclusive, is part of the agreement signed between the CADE and Petrobras to encourage competition in the natural gas market, which would no longer occur since then.
“It is a discussion contrary to the one taken in the past [by the CADE]. It ends with the integrated gas market,” says one of the executives heard by Valor. For another executive, who acts as one of the stakeholders in the issue, with the approval of the purchase, the country “will begin to see unbridled unregulated capitalism” in the gas market.
In its defense, Compass alleged to the antitrust agency that the operation is “unable to replicate the previous scenario, of Petrobras’s transversal dominance,” in particular because “it does not and will not operate in the structuring links of the natural gas chain (production and transportation), which represent the main barriers to the sector’s development.”
Another point to be observed, points out another source, is that the current president of CADE, Alexandre Cordeiro Macedo, should declare himself disqualified from judging the issue because he actively participated in the formulation of the agency’s term of commitment with Petrobras, an initiative from which the oil company made divestments in several fronts, including natural gas. In addition, when he led the agency, Mr. Macedo authorized the participation of the Cosan group in the Gaspetro auction.
*By Fábio Couto, Stella Fontes, Robson Rodrigues — Rio de Janeiro, São Paulo
Source: Valor International