Sale of stake in petrochemical giant likely
Braskem, with several plants along the Gulf Coast, could be a target of Lyondell Basell
Petrobras, Brazil’s state-controlled oil company, is reportedly preparing to sell its $4.5 billion stake in Braskem, a South American petrochemical maker with several plants along the Gulf Coast.
How Petrobras structures the sale could determine whether Houston chemical company Lyondell Basell attempts to acquire Braskem, analysts said.
The prospective sale, outlined in Brazilian news reports, follows months of speculation that Lyonell Basell, led by CEO Bob Patel, is targeting Braskem to expand in Latin America. Braskem, valued at about $13 billion, is trading at a discount following its involvement in a sweeping corruption scandal in Brazil that also ensnared its main shareholders, Petrobras and Brazilian engineering and construction conglomerate Odebrecht.
Braskem said in a
statement this week that it was not informed of the potential Petrobras sale. LyondellBasell declined to comment.
The reports come days after Petrobras and Odebrecht announced plans to consolidate Braskem’s stock into a single class of shares as part of an ongoing restructuring that could make a sale easier. The two companies hold 36.1 percent and 38.3 percent of Braskem, respectively.
Analysts agreed that Braskem’s proposed restructuring could expedite Petrobras’ divestment, but offered competing views about whether that would open the door to LyondellBasell.
Houston firm Tudor, Pickering, Holt & Co. wrote in a research note Wednesday that if Petrobras opts to sell its shares on the open market, rather than directly to a single buyer, it could mean that LyondellBasell has turned its focus elsewhere.
But Hassan Ahmed, a chemicals analyst with New York-based
In Texas, Brazil’s Braskem has petrochemical facilities in La Porte, Freeport and Seadrift.
Alembic Global Advisors, said he considers Braskem an ideal target for LyondellBasell because Braskem maintains similar operations and would be cheaper to acquire than many of its competitors. Both LyondellBasell and Braskem are investing hundreds of millions of dollars in new petrochemicals projects along the Houston Ship Channel to capitalize on cheap and plentiful gas from the West Texas shale boom.
Natural gas is the feedstock for many petrochemicals and plastics. In Texas, Braskem has petrochemical facilities in La Porte, Freeport and Seadrift.
“On the surface, it makes a ton of sense,” Ahmed said. “It’s a real possibility once the shareholder structure is agreed upon.”
Petrobras has long considered selling its stake in Braskem as part of its plan to divest $21 billion in assets after its involvement in the so-called Operation Car Wash investigation, which exposed widespread corruption and graft among some of Brazil’s most prominent politicians and companies. The company earlier this month agreed to pay nearly $3 billion to settle a lawsuit related to the scandal brought by U.S. shareholders.
Ahmed said Odebrecht, which also faces massive costs to settle criminal and civil cases, might also decide to sell its share in Braskem as it works to shore up its balance sheet. Odebrecht and Braskem agreed to pay a combined penalty of at least $3.5 billion to U.S., Brazilian and Swiss authorities to resolve bribery charges.
“They could be forced to sell the stake,” Ahmed said.
LyondellBasell’s stock rose 0.4 percent on Wednesday to $118.94 a share.