Petrobras, Braskem and Ultrapar’s Ipiranga Acquisition Suspended by Brazilian Authorities

---

Researched by Industrial Info Resources (Sugar Land, Texas). On April 17, 2007, the $4 billion acquisition of the petrochemical, oil and energy group Ipiranga by Brazil’s state owned oil company, Petrobras (NYSE:PBR) together with two other Brazilian companies, Braskem (NYSE:BAK) and Ultrapar, was provisionally suspended.

The suspension was determined by CADE, Brazil's antitrust agency, after receiving a report from the sitting judicial authorities stating that fair competition in the domestic petrochemical and fuel distribution sectors may be affected after Ipiranga’s takeover.

This preliminary injunction, which can be reviewed, amended or vetoed, does not annul the commercial transaction; therefore, on April 18, 2007, the acquiring companies carried out the first of the five steps towards concluding the commercial settlement. Petrobras, Braskem and Ultrapar paid $1.03 billion for the purchase of Ipiranga’s shares. (For details, view related April 3, 2007 news article- Petrobras, Braskem and Ultrapar Acquire Ipiranga, Brazil’s Second Largest Refining Company.) At the same time, they will place all the necessary information at the disposal of CADE’s authorities to demonstrate that the operation will benefit Brazil’s petrochemical market and will consolidate the country’s fuel distribution without affecting customer interests.

Nevertheless, the preliminary measure prevents Ipiranga’s assets from being transferred to the acquiring companies. Petrobras is not authorized to participate in any of petrochemical company Copesul’s commercial or strategic decisions, whereas Braskem has been imposed on the same restriction but in relation to Ipiranga’s negotiations. Furthermore, Petrobras is prevented from changing any commercial or distribution logistics belonging to Ipiranga. The impositions made on Braskem aim at preserving Brazil’s domestic resins market. After the commercial transaction, Braskem would control 50% of the thermoplastic resin market.

The restrictions imposed by the suspension will be effective until legal actions conclude. While Petrobras and Ultrapar have not given any comments, Braskem expressed that the acquisition is one step towards restructuring the petrochemical market.

Industrial Info Resources (IIR) provides marketing communication services ranging from industrial database solutions to market forecasting, custom analytics, and specialty promotions that support high-level image campaigns.