Unipar and Petrobras are among candidates for control

Control of Braskem, the country’s largest petrochemical company, is at stake. The outcome is still unpredictable, but involves two main hypotheses: on the one hand, the private sector remains in charge; on the other hand, the government may once again take the lead in the sector, reversing a privatization process carried out in stages since the 1990s.

The end of this story depends, to a large extent, on the decision of one person: President Luiz Inácio Lula da Silva (PT), a historic defender of the direct role of the State in the economy.

Today Braskem is controlled by Novonor (formerly Odebrecht), owner of 38.3% of the total capital, which is sunk in debt and plans to leave the business. State-owned Petrobras is the second largest shareholder, with 36.1%. Minority shareholders hold the remaining 25.6%.

In May, the consortium formed by the National Petroleum Company of Abu Dhabi (Adnoc) and the American manager Apollo offered Novonor BRL 47 per share, of which BRL 20 in cash and the rest in instruments such as “perpetual debentures” and warrants.

In June, Unipar, the second largest Brazilian petrochemical company, offered approximately R$10 billion, or R$36.50 per share, entirely in cash, in a proposal that can be extended to the other partners.

Meanwhile, the Batista brothers, owners of JBS, who have already had their proposal previously rejected, are still interested and articulate a new offer.

A report by BTG Pactual evaluated Unipar’s proposal as more attractive than that of Adnoc/Apollo, as the “net present value” of the latter would be lower – less than R$ 30 per share. The option for Unipar would also be more favorable to creditors and would lead to a large cut in the company’s debt, of more than R$ 14 billion.

The issue is that, under Braskem’s shareholders’ agreement, Petrobras has preemptive rights in the purchase of stakes in its partner Novonor. If the state-owned company is interested, therefore, it’s their business.

An eventual acquisition would raise Petrobras’ stake in Braskem to almost 75% of the total capital. In the case of voting capital, the slice would reach 97.1% – today Novonor holds 50.1% of common shares (with voting rights) and Petrobras, 47%.

Braskem has 40 industrial units and employs 8,000 people in 11 countries. Last year, it recorded net revenue of US$ 18.7 billion (4% less than in 2021) and net loss of US$ 70 million (compared to a profit of US$ 2.6 billion in the previous year).

Investigated by Operation Lava Jato in the past decade, the company admitted paying bribes to politicians and parties to close contracts with Petrobras. In 2019, it signed a leniency agreement worth almost BRL 2.9 billion with the Comptroller General of the Union (CGU) and the Advocacy General of the Union (AGU). In 2021, its former president José Carlos Grubisich was sentenced to 20 months in prison in the United States for participating in a scheme to bribe Petrobras officials.

Lula is the one who will decide Petrobras’ participation in Braskem

For now, it is not known what Petrobras will do. This Thursday (22), the president of the National Bank for Economic and Social Development (BNDES), Aloizio Mercadante, said that the decision is in Lula’s hands. BNDES is one of Braskem’s creditor banks, alongside institutions such as Bradesco, Itaú and Santander.

“Petrobras and BNDES will wait together for President Lula’s decision on Braskem”, stated Mercadante in a press conference given along with the president of the state-owned company, Jean Paul Prates. “We are working, doing analysis, but we can move both to one side and to the other”, said Prates.

Sources linked to the sector are concerned about the possibility of Petrobras making use of its preemptive right and becoming Braskem’s controlling shareholder. There are those who mention the risk of monopoly in the chain. Others observe that state control would leave Braskem susceptible to political interference and other interests, to the detriment of the company, private shareholders and the sector.

“The company today has public capital and managers whose vision is private. The weight for the profit of the shareholders and the social part is the same. As the company’s control changes and Petrobras’ participation increases, you can have a management typical of Petrobras, with a more social vision, and this ends up having a bearing on the company’s economic activity. It interferes with the shareholders’ margin and profit”, says Marcus Delia, partner-director of Leggio Consultoria.

According to him, Braskem is the main supplier of thermoplastic resins for the petrochemical industry in Brazil. It produces basic chemicals that are used in plastic production.

Ilan Arbetman, an analyst at Ativa Investimentos, shares some questions about the government’s guidelines. For him, the current management seeks synergy with the petrochemical market, which could lead Petrobras to seek control of Braskem.

On the other hand, notes Arbetman, the acquisition may be questioned at the Administrative Council for Economic Defense (Cade) if there is a monopoly interpretation at some point in the sale process. The same applies, incidentally, in the case of purchase by Unipar.

Another point raised by Arbetman is that, if the hammer falls in favor of a private company, the minority shareholders are entitled to the tag along – that is, they will be able to sell their shares for the same prices offered to Novonor.

“If Petrobras buys, it will only pay what it agrees with Novonor, potentially less, because it doesn’t have to extend the proposal to others. A priori, it would be cheaper”, says the Ativa analyst.

The BTG Pactual report corroborates this observation: “If Petrobras decides to buy Novonor, we believe that the minority shareholders will not take advantage of the rights of tag along since it does not involve a change of control”.

Negotiations for Braskem may take time

Talks about the sale of Novonor’s stake in Braskem are ongoing and may take some time. For sources close to the negotiations, Petrobras as the parent company alienates investors. In any case, the acquisition by a private buyer would require negotiation with Petrobras, given its relevant position in the shareholder structure. Another possibility at the table is a division of assets between the eventual new private controller and Petrobras.

Delia, from Leggio Consultoria, believes that Unipar stands out in this competition for being a relevant player in the petrochemical market. Meanwhile, a fund – in this case, the US manager Apollo – is interesting because it attracts investments.

Unipar’s proposal contemplates the partial payment of creditor banks and new conditions for the balance of the remaining debt. Petrobras would likely continue as a partner.

According to Unipar, the negotiation with Petrobras and its participation in the terms of the operation will take place “at the right time”, balancing the interests of those involved. “The final design of the business structure is not yet defined. The final structure of the transaction will still be defined with the partner”, says the company.

The Minister of Mines and Energy, Alexandre Silveira, had stated that Petrobras will continue as a partner of the petrochemical company Braskem, if it depends on the government’s will. This week, rumors even suggested that the oil company would have given up on buying Novonor’s stake, but the state-owned company denied any decision.

“The company reaffirms that there is no decision by the executive board or the board of directors in relation to the disinvestment process or increase in participation in Braskem or any other company. The company continues to observe and analyze the situation and will wait for the right moment to make decisions”, informed the state company, in a note.

When contacted, Braskem and Novonor declined to comment on the matter.

Braskem is charged for environmental damage in Maceió

Talks about the sale of Novonor’s stake again raised accusations of an environmental disaster caused by Braskem in Maceió (AL). The company’s extraction of rock salt over four decades would have caused the subsidence of the ground in five districts of the capital of Alagoas in 2018, affecting approximately 50,000 people.

Braskem has launched a compensation program for affected families, and Alagoas is also seeking compensation. In May, the state court blocked BRL 1.1 billion from the petrochemical company to guarantee the payment of property damages. According to Veja magazine, Braskem said it had already disbursed R$7.5 billion for the damage and had another R$6.1 billion in provisions to repair the damage.

In May, when Adnoc and Apollo made their proposal to buy part of Novonor, senator Renan Calheiros (MDB-AL) stated that the Senate and the government of Alagoas will not allow an agreement that does not solve environmental problems in Maceió. He also said that he would speak with Lula and Jean Paul Prates to ensure that the victims are entitled to the same treatment given to the company’s creditor banks.

This Thursday (22nd), there was a serious incident at the company’s facilities in Santo André, in the petrochemical complex in the ABC region of São Paulo. The explosion of a tank, followed by fire, killed a worker from a subcontracted company and injured at least six people.