In a recent development in the Brazilian chemical industry, Unipar Carbocloro, a major player in the chlor-alkali and PVC manufacturing sector, has put forward a non-binding proposal to acquire control of Braskem, the leading producer of polyolefins in Brazil.
This move holds significant implications for both companies, as well as for the overall market dynamics in the region. Braskem, being a much larger entity than Unipar, possesses substantial assets and market presence.
Unipar’s Proposal and Novonor’s Motivation:
Unipar Carbocloro has directed its proposal to Novonor, which currently holds a majority stake of 50.1% of the voting shares and 38.3% of the total share capital of Braskem. Novonor has been actively seeking to divest its shares in Braskem for several years, driven by the need to fulfill commitments made to creditors during its bankruptcy proceedings. Unipar’s proposal entails a partial payment to creditor banks and the establishment of new conditions for the remaining debt balance. Notably, Novonor may retain an indirect minority interest in Braskem, indicating a potential compromise between the two entities.
Acquisition Strategy and Petrobras’ Involvement:
To gain controlling ownership of Braskem, Unipar plans to launch a public offer to acquire common shares, as well as class A and Class B preferred shares. Additionally, a tender offer would be made to acquire all shares traded on the New York Stock Exchange. Unipar intends to engage with Petrobras, the state-controlled energy producer, which currently holds 47.0% of Braskem’s voting shares and 36.1% of its total share capital. The involvement of Petrobras in the negotiation process adds another layer of complexity to the potential acquisition.
Financial Implications and Size Disparity:
Unipar has not disclosed the financing details of the proposed acquisition. However, it is important to note that Braskem is significantly larger than Unipar in terms of total assets and revenue. In 2022, Braskem reported total assets of R$88.0 billion ($18.0 billion) and sales of R$96.5 billion, while Unipar recorded total assets of R$5.56 billion and revenue of R$7.27 billion in the same period. This substantial difference in scale could present challenges for Unipar in terms of integrating the operations and managing the increased market share effectively.
Market Impact and Antitrust Considerations:
The potential acquisition raises concerns about its impact on market competition. As Braskem is the sole producer of polyolefins in Brazil and also manufactures olefins and polyvinyl chloride (PVC), the consolidation of the two companies would make the combined entity the sole producer of PVC in Brazil. This may trigger scrutiny from Brazil’s antitrust authority, CADE. The regulatory approval process is likely to assess the potential implications on market dynamics, pricing, and consumer choice, among other factors, before determining the permissibility of the deal.
Previous Bid and Synergy Potential:
Prior to Unipar’s proposal, the Abu Dhabi National Oil Co (ADNOC) and private-equity firm Apollo had made an offer to Novonor for the acquisition of Braskem. This alternative bid carried the potential for synergies due to the presence of another Abu Dhabi state-controlled entity, Mubadala, which owns a large refinery in Camacari, Bahia state in Brazil. The Camacari region serves as a key petrochemical hub, where Braskem has multiple plants. A successful deal with ADNOC and Apollo would have expanded Abu Dhabi’s footprint in the Americas, facilitating participation in various ventures.