Brazil’s Unipar still pursuing controlling stake at Braskem – CEO

Jonathan Lopez

11-Aug-2023

SAO PAULO (ICIS)–Unipar’s non-binding offer to acquire a controlling stake at Braskem may have expired but it continues “debating” the transaction with the company’s shareholders, the CEO at the Brazilian chemicals producer said on Friday.

Mauricio Russomanno added that, in case the Braskem transaction fell through, Unipar would continue “contemplating other opportunities” in the market to expand.

The Brazilian producer of caustic soda and chlorine derivatives such polyvinyl chloride (PVC) said earlier this week its sales and earnings fell sharply in the first half of 2023 on the back of lower sales volumes and lower selling prices.

However, management was keen to stress on Friday, the company’s healthy cash flow and low debt burden, stressing its “financial structure” would make the Braskem stake acquisition viable.

In June, Unipar launched a 30-day non-binding offer to acquire Novonor’s controlling stake at polymers major Braskem as the scandal-ridden company, formerly known as Odebrecht, seeks to lessen its high debt burden.

Novonor has a 38.3% stake at Braskem, but its voting capital stands at 50.1%. Brazil’s state-owned energy major Petrobras controls a 36.1% stake, with 47.0% of voting rights.

In May, Abu Dhabi’s state-owned energy major ADNOC and US private-equity firm Apollo had made an offer to Novonor for the Braskem stake.

In July, a third bidder – Brazil’s conglomerate JBJ Agropecuaria – launched an offer to acquire Novonor’s stake for Brazilian reais (R) 10.0bn ($2.04bn). Novonor debt burden stands at around R14.0bn.

‘COMPLEX PROCESS’
On Friday, Unipar’s CEO did not go into details on how the company would finance the controlling stake’s acquisition, but added the company’s know-how in petrochemicals would allow it to maximise Braskem’s assets.

Admittedly, Braskem is much larger than Unipar. In the second quarter, the former posted sales of R17.8bn, while Unipar’s stood at R1.32bn. In 2022, Braskem posted sales of R96.5bn and Unipar of R7.27bn.

“We have restrictions on the information we can share, but Unipar continues with the process, debating [with Braskem’s shareholders] and we are aiming to conclude this transaction,” said Russomanno, speaking to reporters.

“It is a complex process. At the end of the day, this is an asset which has been for sale for five years [and it has not been sold]. We must aim to achieve a format that can satisfy everyone involved.”

The CEO went on to say that Unipar’s offer was different to the other two because the company knows Brazil’s petrochemicals markets and would be able to maximise Braskem’s assets due its knowledge of the industry.

He added, of course, the Brazilian factor: with Braskem being a key industrial player in Brazil, and Petrobras being a shareholder, the government would reportedly consider a Brazilian buyer a more suitable option.

“We are ready to undertake such a transaction. We have the financial structure to do so,” said Russomanno.

“Moreover, we are a player who committed to industrial performance: we are a Brazilian company, and the transaction would make sense for us as a company and for the country’s industrial sector.”

BRAZILIAN WOES
Unipar’s CEO and CFO, Marco Rabello, said Brazil’s uncompetitive position for input costs globally was putting a strain in chemicals companies, with the situation made worse for domestic producers by high levels of imports putting downward pressure on prices.

They cited figures from the country’s trade group Abiquim showing a fall of 5% in demand for chemicals from the industrial sectors in Brazil during the first half.

Manufacturing added in July its ninth month in contraction territory.

Earlier this week, Braskem – who also posted poor second-quarter results – said the situation for Brazil’s chemicals has become very challenging, adding an industrial public policy had become indispensable to avoid plant stoppages or closures.

On Friday, Rabello concluded: “Since the beginning of 2023, the share of imports stands at very high levels. It is impossible to compete with imported product produced with competitive advantages such as lower energy and feedstocks costs and lower taxes.”

($1 = R4.90)

Thumbnail shows the Braskem logo. Image by ICIS.

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