ADNOC gives up on Braskem acquisition

The Abu Dhabi National Oil Company (ADNOC) is no longer interested in buying Novonor’s controlling stake in the Brazilian petrochemical giant Braskem. Since the decision was made public, Braskem’s share price crashed by almost 15 percent.

ADNOC’s withdrawal from the deal comes after long negotiations and due diligence on Braskem. Initially, the Gulf company made a purchase proposal together with the U.S.-based manager Apollo a year ago. In November, ADNOC — this time without Apollo — reiterated its proposal with a non-binding offer, saying it would pay BRL 10.5 billion (USD 2.1 billion) to control Latin America’s largest petrochemical company. Now, it has backed away from the deal.

Novonor is an infrastructure group formerly known as Odebrecht. Once towering over competitors, Odebrecht was at the center of the biggest corruption scandal in Brazilian history, uncovered by the years-long anti-corruption task force Operation Car Wash. Novonor currently holds 50.1 percent of Braskem’s ordinary shares and 38.2 percent of its total capital. Selling its stake in the petrochemical would be instrumental in its financial recovery.

Despite being Latin America’s largest petrochemical company, Braskem faces massive liabilities, starting with an environmental tragedy in Brazil’s Northeast caused by abusive salt mining practices. As The Brazilian Report showed in an award-winning in-depth investigation in 2021, Braskem’s salt mining destabilized the subterranean caves underneath five neighborhoods in Maceió, the state capital of Alagoas, leading to the collapse of buildings and forcing more than 60,000 people to leave their homes and businesses since 2018. 

That same year, Braskem ceased its activities and began to closely monitor the closure and stabilization of its 35 mines in the region of the Mundaú lagoon — once a fishing hotspot and one of the city’s tourist attractions  — while trying to reach an agreement with federal and state prosecutors to compensate the affected populations, as well as the municipality of Maceió.

A first agreement was reached in early 2020 with the federal and state prosecution offices and the federal and state public defender offices to compensate the city and affected families. 

However, the case is far from a conclusion. Last year, the company signed a BRL 1.7 billion addendum to the agreement with the city government of Maceió in compensation for land subsidence and was ordered by a local court to pay financial compensation to the state of Alagoas. Federal and state prosecutors have been trying to expand the affected area and, consequently, the compensation owed by the company.

The Maceió tragedy is also the target of a congressional inquiry launched in March.

In addition to ADNOC, Unipar, a São Paulo-based chemical producer, and J&F Investimentos, a holding company that controls Brazil’s top meat producer, had also offered to buy Braskem’s control. 

Jean Paul Prates, the chief executive of oil major Petrobras — which has the right of first refusal in this transaction, as it holds a minority stake of 36.1 percent in the company — said last month that it is seeking “new partners” to share management of Braskem, signaling it is no rush to seal a deal.

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