Brazilian group Ultrapar Participacoes SA (UGPA3.SA) is leading talks to acquire Petrobras' (PETR4.SA) refinery Refapin the state of Rio Grande do Sul, both companies said in filings,confirming the negotiations first reported by Reuters earlier on Tuesday.
Brazil has been trying sell eight refineries, which would end Petrobras's virtual monopoly in the country's refining sector and open one of the world's largest fuel markets to private investors. Petrobras is currently negotiating six of them and is expecting two more offers by the end of the first quarter, the company said in a filing.
Petroleo Brasileiro SA (PETR4.SA), is trying to get Ultrapar to boost its offer before agreeing to exclusive talks, three people close to the deal said. Offers below Petrobras's initial price range have made the company miss its internal deadline to sign a deal by the end of 2020.
Ultrapar said Refap would be complementary to its portfolio, helping increase efficiency. In the oil and gas sector, Ultrapar controls fuel distributor Ipiranga, gas distributor Ultragaz and bulk storage company Ultracargo.
Raízen, a joint venture between Royal Dutch Shell PLC (RDSa.L) and Brazilian ethanol producer Cosan SA (CSAN3.SA), has also bid for Refap, two of the sources said. A second round of offers has not been ruled out, the people said.
Raízen declined to comment.
Indian conglomerate Essar Group, which had pre-qualified for the binding phase, dropped out of the competition, the people said.
Ultrapar and Raizen have also bid for refinery Repar, which supplies the relatively affluent states of Parana, Santa Catarina, Sao Paulo and Mato Grosso, the sources said. Petrobras has hesitated to designate a winning bidder because it considers the prices too low, three of the people said.
In its filing, Petrobras said it has received binding offers and is analyzing them.
Refap and Repar are located in Brazil's southern region and have a production capacity of 200,000 barrels per day each, or about 18% of the country's capacity.
Antitrust rules would bar Petrobras from selling the units to the same firm.
Elsewhere, Petrobras is in exclusive talks with Abu Dhabi investor Mubadala Investment Co to sell its Bahia unit RLAM. Those talks, at a more advanced stage, could bring a deal as soon as this month, two of the people said.
Petrobras said on its statement on Tuesday night it is expecting final offers from all RLAM competitors based on the contract terms set with Mubadala.
No prices were disclosed.
The producer has also received binding offers for its refining units Reman, Lubnor and SIX, the company said in the filing. No exclusivity was set, which allows rebids, one person said.
Petrobras expects binding offers for its Pernambuco refinery RNEST and Minas Gerais state refinery REGAP by the end of the quarter.
Petrobras has been trying to sell refineries for almost a decade with no success, facing resistance from politicians, union workers and local contractors. A history of government fuel price intervention has also scared away investors in the past.
Chief Executive Roberto Castello Branco, who took office in January 2019 appointed by President Jair Bolsonaro, relaunched the process as part of a plan to focus on deep-water exploration and cut debt.
On December 2019, Petrobras signed an agreement with antitrust watchdog Cade to privatize eight refineries, or about half of Brazil's fuel production capacity, by December 2021. Petrobras has told potential buyers it is not obliged to sell the plants if offers fall below its internal price range.
A decrease in fuel demand accelerated by the Covid-19 pandemic is a key reason behind the price gap between Petrobras and potential buyers, three of the people said.
The sales will also allow Petrobras to raise fresh money and reduce debt.
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