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 that 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 interested in a transaction that would value Braskem at $11.5 billion. Brazilian state oil company Petrobras has long been interested in selling its 47% interest in Braskem.

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

Headquartered in Rotterdam but managed from downtown Houston, LyondellBasell is a chemical company of global scope. It is the largest producer of polypropylene in North America and Europe. The firm is the biggest polyethylene maker in Europe. Additionally, it makes propylene oxide, styrene, ethylene oxide, ethylene glycol, and acetyls, and it runs a refinery in Houston.

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

Braskem is a strong regional petrochemical player. It 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.

“We believe that the potential combination of LyondellBasell’s and Braskem’s complementary strengths, product portfolios, and operational footprints would create significant value,” LyondellBasell and Odebrecht said in a joint statement.

Given both companies’ heft in polypropylene in the U.S. and Europe, antitrust regulators would likely give the deal close scrutiny. Moreover, regulators in Brazil might be cautious about giving a foreign firm the command of domestic plastic markets that it permitted a local firm to have.

If a takeover is consummated, LyondellBasell would be juggling two deals at the same time. In February it agreed to purchase plastics compounder A. Schulman for $2.25 billion.