Petrobras, Braskem and Ultrapar Acquire Ipiranga, Brazil’s Second Largest Refining Company

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Researched by Industrial Info Resources (Sugar Land, Texas). Brazil’s State owned oil company, Petrobras (NYSE:PBR) together with two other Brazilian companies, Braskem (NYSE:BAK) and Ultrapar, acquired the petrochemical, oil and energy group Ipiranga for $4 billion. Petrobras paid $1.3 billion, Braskem $1.1 billion and Ultrapar $1.6 billion.

Ipiranga, which had a net profit of $257 million in 2006, has a petroleum refinery and the second biggest fuel distribution network in the country with 4,240 gas stations. It produces about 650,000 tons of plastic resins through Ipiranga Petroquímica and has a share in Copesul, a petrochemical company.

After the acquisition, Ipiranga’s fuel distribution in the southern and southeastern regions of the country will be in the hands of Ultrapar, which will continue to operate under the Ipiranga brand. Petrobras, on the other hand, will control Ipiranga's distribution network in the north, northeast and midwest areas, and will be able to use the Ipiranga brand for five years. Petrobras, Ultrapar and Braskem will handle Ipiranga’s downstream business in equal shares. Copesul will be supervised by Braskem, which will own 64% of the shares, whereas Petrobras will have the remaining 36%. In related news, Petrobras plans on producing biodiesel at the Ipirangar refinery.

The CVM, Securities and Exchange Commission of Brazil, was alarmed by an unusual 33% growth in movement of Ipiranga’s shares in the stock market that took place before a public offer to buy ordinary shares was published. Investigations indicated that inside information may have been revealed by employees from one of the acquiring companies favoring investment groups, which were able to sell shares at a higher price.

The CVM must finish the preliminary investigation within 90 days; however, the Parliament’s Mining and Energy Commission, which is also in charge of investigation, summoned authorities from the involved companies on March 28, 2007, to provide more information on the commercial transaction. The companies’ representatives expressed willingness on assisting the government, furthermore, Petrobras has already created an internal commission which will investigate whether the classified information was revealed by one its employees.

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