Braskem´s owner Novonor says won’t hold talks with ADNOC, Apollo

Officials from Latin America´s biggest petrochemical company Braskem, also owner of an ethylene-polyethylene complex in Mexico and also the biggest polypropylene producer in North America with five plants in the U.S., said that Braskem´s owners Novonor won’t talk with the Abu Dhabi state oil company ADNOC and the Apollo fund that made earlier in May a joint offer for Braskem.

Braskem Idesa plant in Mexico (an ethylene and polyethylene complex) and its workers. Image courtesy of Braskem

Pedro Texeira de Freitas, Braskem´s financial director, wrote on May 16, 2023 to the Brazilian stock authorities a letter to provide requested information around a report it said was published four days earlier in Brazilian newspaper Folha de Sao Paulo titled: “Braskem controllers disapprove offer from arabs.”

 “The offer made by the fund Apollo and the state Adnoc (Abu Dhabi National Oil Company) did not go through the examination of Novonor (formerly Odebrech) and neither from the top officials from Petrobras,” a letter from the company management to Brazilian stock authorities said.

Offer too low

Braskem´s institutional investors director Pedro van Langendonck Teixeira de Freitas said that the offer made of 47 Brazilian reais (about $9.40) per share would not represent that amount paid to shareholders that in reality may only receive just about 20 reais per share.

“It is for that that the two main shareholders Novonor (with little more than 50%) and Petrobras (38%) do not want to sit at the negotiation table,” the letter stated.

“Novonor (…) up to this moment has not received any proposal from potentially interested parties that would imply material binding evolution in discussions being held with banks” that hold claims to stakes, the letter said.

Braskem´s Teixeira de Freitas said that Braskem´s management had contacted Novonor to ask for information related to any sale decision, and that it received a written reply where the majority owner stated its intention to abstain from talks.

Apollo´s plans

According to information from Apollo´s website, the fund has acquired since inception over 350 companies and currently manages over $100 billion in assets.

“Our flagship Private Equity strategy has the industry’s leading performance record over three-plus decades, driven by our ability and process to find value-oriented opportunities and strengthen performance through growth, innovation, and operational improvements,” Apollo states in its website.

ADNOC, or Abu Dhabi National Oil Co., is a state company with a production capacity of three million barrels of crude oil per day as well as 10. 5 billion cubic feet of natural gas per day, as per information on its website.

Abu Dhabi is the capital of the UAE. The United Arab Emirates (UAE) is among the world’s ten largest oil producers. About 96% of the country’s roughly 100 billion barrels of proven oil reserves are in Abu Dhabi. The country is well within the ten countries in the world with the biggest reserves.

Novonor position

There are two top controllers of Braskem with one of them the majority shareholder Novonor, a privately held Brazilian group that about four years ago changed its name from Odebrecht, the original name of the group that came after the family name of the founding family.

The change of name occurred about three years after the Odebrecht name had become linked in Latin America not just to large scale engineering projects such as highway constructions but also to multiple corruption trials.

According to a Dec. 2016 statement from the U.S. Department of Justice, both Braskem and its majority stakeholder then named Odebrecht “pleaded guilty and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the U.S., Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.”

Petrobras position

The top minority stakeholder at Braskem is Brazilian state oil company Petrobras. Besides its stake in Braskem, Petrobras other downstream assets include 13 refineries that process most of the refined fuel consumed in the country that is home to about 215 million people.

According to a Reuters news agency report from May 3, the Rio de Janeiro-based Petrobras produced nearly 2.7 million bpd of oil and oil equivalent.

Braskem was created in 2002 through the merger of six companies from the Odebrecht and the Mariani groups.

Most company assets are in Brazil. Assets in North America include five polypropylene plants in the U.S. that make the company the top producer of that resin in the Americas. In addition, the company leads the Braskem-Idesa venture that is the top polyethylene producer in Mexico.

The Sao Paulo-based company has been informing the market periodically and restated in recent years several times the intention of the company owners Novonor and Petrobras to sell all or part of the firm.

Company officials had also said back during the pandemic that a management analysis had included contemplating whether the company would be worth more if sold in one block or in pieces.

Impact of Lula´s 2022 election

The 2022 election of Brazilian President Luiz Inacio Lula da Silva (Jan. 1, 2003 - Jan. 1, 2011; Jan. 1 2023 -   ) may have consequences on any Braskem transaction. The Brazilian government runs Petrobras, biggest minority owner of Braskem.

Lula is a former union leader and member of the Workers´ Party.

Petrobras, the Brazilian state oil company, will have first rights to buy the rest of Braskem when the majority partner, Novonor, decides to go ahead with any sale of the entire company, Brazilian newspaper Globo reported on Nov. 2022.

By Renzo Pipoli