Braskem, the Brazilian petrochemical company, has received a joint non-binding offer from Apollo Global Management and Abu Dhabi National Oil Company (ADNOC).
However, the terms of the offer have divided opinion in the market, with creditor banks not unanimous on the figures, and doubts remain as to whether Petrobras will agree to sell its stake given the new government’s policy of not divesting strategic assets.
Payment Structure and Price per Share
Sources close to the process indicate that the payment structure proposed by the potential buyers would embed a price per share lower than the R$47 offered. In present value terms, and depending on the discount rate used, the price would range between R$24 and R$34 per share. The R$47 per share offer by Apollo and ADNOC comprises R$20 paid in cash, R$20 paid with perpetual bonds issued by the purchasers at a rate of 4% per year, and R$7.14 (at today’s prices) in warrants. In a second step, the final price could be increased to R$49 per share, depending on certain conditions. Financial market sources suggest that, considering the current interest rates in the United States and Brazil, the payment structure would not reach R$47 per share.
Creditor Banks’ Opinions
Apollo’s previous offer had already displeased one of the creditor banks, as the U.S.-based asset manager had requested exclusivity in the due diligence process about six months ago. Another lender, which also holds shares as collateral, defended Apollo’s offer on this basis, but was defeated. ADNOC’s entry reportedly made the proposal “more palatable,” but the financial details will be analyzed, said a source familiar with the matter.
Petrobras’ Stance
Novonor owns almost R$15 billion to Bradesco, Itaú Unibanco, Santander, Banco do Brasil, and Brazilian Development Bank (BNDES), a debt guaranteed by all the Braskem shares held by the former Odebrecht. Novonor owns 38.3% of the petrochemical company’s total capital, and Petrobras, the second largest shareholder, owns 36.1%. The state-owned company had indicated to potential buyers before the change of command that it would not sell its stake for less than R$43 per share. After the change in the management team, Petrobras has not yet indicated to Novonor whether it will stick to the plan and sell its shares or exclude the petrochemical company from its divestment plan.
Other Interested Parties
In addition, there are other interested parties in Braskem who have been encouraged to stay in the process despite the Apollo-ADNOC bid. Another petrochemical company, Unipar, is interested in the company’s assets in São Paulo, and J&F Investimentos, owner of JBS, is still interested in taking over Braskem. Depending on the terms of the deal with J&F, the holding company of the Batista family, Novonor could remain a minority shareholder in the company.
Senator Renan Calheiros’ Interference
The process of selling Braskem is also subject to politics. Senator Renan Calheiros is asking the federal government to block the transaction until the losses caused by the petrochemical company’s former rock-salt operation in Maceió are fully covered. The company has already set aside more than R$13 billion, between payments made and provisions in the balance sheet, to address the geological problem that caused soil sinking in five neighborhoods in the capital city of Alagoas. Last month, the courts blocked R$1.1 billion of the company’s funds, at the request of the state of Alagoas, which wants to be
While Apollo and ADNOC may have made a non-binding offer to purchase Braskem, there are other interested parties who have not been deterred by their offer. Unipar, another petrochemical company, has expressed interest in purchasing Braskem’s assets in São Paulo. Additionally, J&F Investimentos, the owner of JBS, has also expressed interest in taking over Braskem. If Novonor reaches a deal with J&F, the holding company of the Batista family, it could potentially remain a minority shareholder in Braskem.
Political considerations
The process of selling Braskem is also subject to politics. Senator Renan Calheiros has asked the federal government to block the transaction until the losses caused by the company’s former rock-salt operation in Maceió are fully covered. The company has already set aside more than R$13 billion to address the geological problem that caused soil sinking in five neighborhoods in the capital city of Alagoas.
In a video shared on social media on Friday, following the news of Apollo and ADNOC’s interest in Braskem, Mr. Calheiros said he would reach out to President Luiz Inácio Lula da Silva and Petrobras “not to allow a proposal to solve the problem of Novonor’s creditor banks, but not to guarantee equal treatment to the victims of this terrible environmental crime.”