LyondellBasell in talks to buy stake in Braskem

LyondellBasell Industries is in exclusive negotiations to buy a controlling interest in Braskem from the Brazilian conglomerate Odebrecht, the parties have confirmed.

Rumors of LyondellBasell’s overtures to Braskem have surfaced periodically since last November. At the time, Odebrecht denied it was interested in selling its 50.1% stake in the firm.

Last month, stories emerged in the Brazilian press that LyondellBasell was considering a transaction that would value Braskem at $11.5 billion. Brazilian state oil company Petrobras has long wanted to sell its 47% interest in Braskem.

If completed, the deal will give LyondellBasell control of a smaller, Latin American version of itself.

LyondellBasell calls itself the largest producer of polypropylene in North America and Europe. The firm is the biggest polyethylene maker in Europe. It also makes other petrochemicals, and it runs a refinery in Houston.

It had sales of $34.5 billion and operating income of $5.5 billion in 2017.

Braskem operates four complexes in Brazil and is that country’s only producer of polyethylene, polypropylene, and polyvinyl chloride. It also has sizable polypropylene businesses in North America and Europe that it created through purchases from Dow Chemical and Sunoco.

It had sales of $15.4 billion and operating income of $3.1 billion in 2017.

“I can see why LyondellBasell would be interested in this,” says Jorge O. Bühler-Vidal, director of Polyolefins Consulting. The acquisition would expand LyondellBasell’s reach in Brazil, where it doesn’t have major operations. Moreover, it’s a good technological fit because Braskem licenses LyondellBasell’s polypropylene and polyethylene processes.

North American overlap of the two polypropylene businesses could be a problem for U.S. antitrust regulators, who might force the companies to divest some capacity before they clear the deal, Bühler-Vidal says. Braskem’s European polypropylene presence is more modest and shouldn’t pose as much of a problem.

“The question is, what does Brazil the country think about this?” Bühler-Vidal asks. The government might not be pleased with a foreign firm commanding hefty market share in chemicals. But that could be smoothed over if Petrobras stays on as a minority partner, he notes.