Odebrecht and LyondelBasell cancel negotiations for sale of Brazilian Braskem

On Tuesday, Odebrecht and chemicals maker LyondellBasell Industries announced that they have unsuccessfully closed negotiations related to the sale of control of the Braskem petrochemical company to the European group.

Reuters reported in March that LyondellBasell’s talks with Odebrecht about a possible US $ 11 billion deal for Braskem had cooled down due to issues related to the delay in sending the document to the North American regulatory body and a gas supply contract with Petrobras.

Braskem shares fell by 20% in the São Paulo stock exchange after the announcement of the end of the negotiations. At 11:49, Braskem’s class A preferred shares fell 17% to 34.25 reais, having retreated to the lowest level since July 2017 at the worst moment, when they were traded at 32.88 reais. The Ibovespa showed a 0.2% retracement.

Meanwhile, LyondellBasell shares rose by 2.3% at US $79.50.

Safra analysts claimed that the failure of negotiations between Odebrecht and Lyondell involved aspects beyond the financial ones. They referred to the slide of the shares of Braskem from the New York Stock Exchange and the potential problems of the company related to the sinking of soil in Maceió, which caused the authorities to force the company to suspend mineral extraction activities to supply its factories in the state.

“The potential responsibilities are still in the initial stages of discussion and may take years to be resolved,” said Safra analysts.

Odebrecht, which has been trying to restructure after participating in a corruption scandal investigated by the Lava Jato operation, had been discussing the agreement with Lyondell for more than a year and a half.

LyondellBasell said they closed negotiations with Odebrecht after careful consideration but did not elaborate.

In a statement also on Tuesday, the Brazilian petrochemical company said it will “continue to seek opportunities that have the potential to add value to Braskem and, consequently, to all its shareholders.”

In May, Braskem reported that its actions in the US they would be delisted from the New York Stock Exchange after the company failed deliver their 2017 20-F form before its deadline.

Lyondell’s board had decided it would not conclude the agreement before Braskem registered its annual 20F report for 2017 with the Securities and Exchange Commission (SEC), a source told Reuters.

The talks between Odebrecht and LyondellBasell had been closely monitored by Petrobras, which divided Braskem’s control with Odebrecht and awaited the conclusion of the operation to evaluate the possibility of selling its share in the company to the same buyer.

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