Novonor (formerly Odebrecht), current controller of the petrochemical company, needs to sell its stake to settle debts with 5 banks
The sale of control of braskem for the Novonor (formerly Odebrecht) has aroused the interest of both large national and foreign companies and the government. So far, 3 groups have already submitted formal proposals to buy shares in the petrochemical giant: unite, J&F It is Apollo/Adnoc. And one more company can do the same: Petrobras.
The President’s Government Luiz Inacio Lula da Silva (PT) has encouraged the transaction that would save Novonor and allow Petrobras to return to the petrochemical sector, a desire of the government and the PT, as shown by the Power360 in June. In the market, there is a consensus that the final word on the sale will be given by Lula.
The state-owned company is a minority shareholder in the petrochemical company with 36.1% of the total capital. Novonor has 38.3% and needs to sell its share to settle debts. The company went into judicial recovery in 2020 after having its accounts weakened due to convictions in Operation Lava Jato.
To face the financial crisis it faced, Novonor sold its shares in Braskem as loan guarantee to 5 banks, its main creditors in the judicial recovery process. Novonor’s debt with these banks is around R$15 billion.
Petrobras legally has the preemptive right to purchase share control as it is a minority shareholder. And also the possibility of tag alonga mechanism that guarantees the right of the state-owned company to leave the company if control of the company is acquired by an investor that until then was not part of the company.
On June 14, the president of Petrobras, Jean Paul Prates, said he was comfortable with the preemptive right that the state-owned company has over Braskem’s shares. He also admitted that the company is working internally to assess the possibility of covering competitors’ bids for the purchase of the petrochemical company.
On July 10, Petrobras informed the market of the start of the due diligence (in-depth analysis) of Braskem data. The objective is to evaluate the company’s figures for decision-making on the possibility of the state-owned company exercising preemptive rights.
On Wednesday (July 19, 2023), Prates told journalists that the oil company will have the privilege of being the last to speak out and will analyze all proposals. At the time, according to Economic value, the director of industrial processes and products at Petrobras, Willian França, also said that the 3 companies had put their cards on the table for the state-owned company. “We will exercise the preemptive right, if applicable, at the right time”, he stated.
THE CARDS ON THE TABLE
Among the proposals made, Unipar’s stands out for one point. The chemical company from Bahia would not buy all of Novonor’s shares, but only part of them. Unipar wants to buy 34.3% of the shares. Thus, Novonor would maintain a 4% stake, which pleases the company. This would make Petrobras the largest share of Braskem’s total capital.
The purchase model proposed by Unipar was accepted by Novonor, initiating the process of due diligence for the company. To proceed with the negotiation, the company still depends on the approval of the creditor banks. Unipar is another giant in the petrochemical sector, controlled by Brazilian businessman Frank Geyer Abubakir, 50 years old.
In gross terms, Unipar’s proposal is the same as that of J&F, the holding company of brothers Joesley and Wesley Batista that controls JBS and Banco Original. Both offered BRL 10 billion to Novonor. The difference is in the way of paying, buying the company’s debt with the banks, and the slice of petrochemicals that would be bought with the same amount.
J&F offered the amount for all the shares in Novonor, leaving the company out of the deal. As a result, the unit value of the share would be lower than that of Unipar. The Batistas company priced the share at R$32. Frank Geyer Abubakir’s priced the share at R$36.50. It should be noted that in the last week, Braskem’s shares on the B3 ranged from R$26 to R$24, with both offerings priced above market prices.
The joint proposal by Adnoc, state oil company in Abu Dhabi, with the fund private equity American Apollo Global Management, initially brings higher values. The offer was worth US$ 7.2 billion for all the shares (about R$ 34.5 million), with each share sold for up to R$ 47.
However, at present value, the price offered may drop to less than R$30 per share due to the methods that would be adopted for the final calculation of the payment, which makes the proposal not as advantageous as it seems.
In addition, the end of Novonor’s participation also weighs. For these reasons, the company would be making it difficult for the Apollo/Adnoc consortium to access data for due diligenceaccording to Valor Econômico.
A GIANT ON A GLOBAL SCALE
Braskem’s size justifies the greed for the giant of the petrochemical sector. In 2022, the company had net revenue of BRL 96.5 billion. It is the largest producer of thermoplastic resins (polyethylene, polypropylene and PVC) in the Americas. In Brazil, the company has 100% of the polyethylene and polypropylene market.
The company has 36 industrial plants around the world. In Brazil, they are located in the states of Alagoas, Bahia, Rio Grande do Sul, Rio de Janeiro and São Paulo. The petrochemical industry also accounts for 74% of the domestic plastics market.
The group still has factories in Mexico, the United States and Germany. In the US, Braskem is the largest producer of polypropylene. It also leads the production of polyethylene in Mexico.
UNIPAR MAY HAVE DIFFICULTY AT CADE
The possible sale of the petrochemical company Braskem to Unipar may have difficulties in Where (Administrative Council for Economic Defense) if completed. The company already has a monopoly in several segments and, with the possible transaction, would also concentrate the entire domestic PVC market, as reported by the Power360.
Braskem has 70% of the PVC (polyvinyl chloride) market. Unipar holds the other 30%. The Bahian company, however, is willing to put the PVC factory up for sale so that the Braskem acquisition process is not contested at Cade.
According to public data from Abikin (Brazilian Association of the Chemical and Derivative Products Industry), Braskem has an installed capacity to produce 710 thousand tons per year of PVC. Unipar, on the other hand, 300 thousand tons per year.
Unipar is the leader in the production of chlorine and soda and the 2nd largest producer of PVC in South America. In 2022, the The company’s net revenue reached BRL 7.3 billion15.6% higher than that obtained in 2021. Consolidated net income reached R$ 1.3 billion in 2022, 14% higher than the recurring value of 2021.
#proposals #Petrobras #lookout #sale #Braskem #Lula