Unipar’s offer for Braskem is more advantageous, says BTG – 06/19/2023 – Panel SA

BTG Pactual issued a report to its clients in which it evaluated Unipar’s proposed purchase of Braskem as being more attractive than the one presented by the Adnoc consortium, a state-owned company in the United Arab Emirates, and the Apollo fund.

Novonor controls Braskem with half of the company’s shares and has a debt of R$ 14 billion with creditor banks – Santander, BB, BNDES and Bradesco.

BTG is not a creditor of the company, but is accompanying the renegotiation of that debt, which affects the price of a possible sale of control of Braskem —today divided between Novonor and Petrobras.

The bank claims that Unipar’s offer is lower (in value) than that of the Arabs, but offers more possibilities for return.

According to the document, to which the column had access, Unipar proposes R$ 10 billion in cash, the renegotiation of R$ 4 billion in debts with creditor banks and a public offer to buy R$ 7 billion in shares of minority shareholders.

The Adnoc and Apollo consortium made a combination: part of the payment in cash, part in perpetual bonds with an interest rate of 4% per year and guarantees of NPV (net present value) below R$ 30 per share.

Both proposals are non-binding, which means that they depart from these levels for a future negotiation with Novonor.

According to BTG’s calculations, in this scenario, Unipar’s offer is 22% higher than that made by the Arabs and offers 43% appreciation in relation to Braskem’s closing price on Friday (R$ 29).

The bank also notes that previous proposals failed to align the interests of everyone involved in the operation, especially Novonor’s creditors, who need to receive more than R$ 14 billion – to pay off the debt and leave with some money from the deal.

“Although Unipar’s supposed BRL 10 billion offer seems more favorable to creditors, it still implies a large debt cut,” says BTG in the investor report.

Despite the positive scenario, BTG also recalls that Petrobras owns a part of the shares in the petrochemical company and that, if the company decides to buy Novonor’s stake, minority shareholders will not receive benefits from tag along rights (obligation to extend the same offer from controllers to minority shareholders interested in selling their shares).

A similar opinion is that of consultancy Redd Intelligence, which in a report on the 15th stated that Unipar’s proposal seems more interesting to creditor banks such as Santander, Bradesco, Banco do Brasil, BNDES and Itaú.

With the offer by the company controlled by businessman Frank Abubakir, the so-called haircut (decrease in the debt value) of the banks could reach 33%. In the Arabs’ proposal, Redd claims that there is no nominal decrease and the NPV (present value of the company’s shares) is lower.

Unipar’s proposal does not take into account the indemnity to be paid to the state of Alagoas for the subsidence of the ground in a neighborhood of the capital Maceió, the result of an ore exploration by the company.

Still according to the negotiators, today the state government claims the same amount to be paid to the city hall for the damage caused. This should cost BRL 2 billion, double what was initially agreed.

“Even with this litigation [em Alagoas] and the current low spreads for petrochemicals, two bidders felt the time was right to bid for a piece of Braskem. Will bank creditors choose one or wait for something better? This could be a now-or-never deal.”

With Diego Felix

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