Updated: Brazilian petrochemical company Braskem SA is denying a report that LyondellBasell Industries LV has made an offer to buy it, according to a filing with Brazil's securities regulator.
If a deal did happen, it would combine two of the largest North American makers of polypropylene resin, and two major global polyethylene suppliers.
Braskem's preferred shares on São Paulo's stock exchange B3 rose nearly 12 percent on Oct. 30, after The Wall Street Journal reported that LyondellBasell had made an offer to buy the petrochemical manufacturer, which could value it at $11.4 billion. Citing unnamed sources familiar with the matter, the newspaper reported that the talks are at an early stage and there is no guarantee that they will result in a deal.
Braskem said it "was not addressed by LyondellBasell with any proposed acquisition."
"Braskem management requested clarification from Odebrecht SA, its controlling shareholder, which informed that it is working on alternatives to add value to Braskem and all its shareholders, and reaffirmed its intention to keep Braskem as part of the group's investments," the company said in response to B3's request for explanations for the abrupt rise in its shares.
The petrochemical company has also said that the decision on whether to dispose of Braskem shares is up to its shareholders.
A spokesman for LyondellBasell said: "LyondellBasell doesn't comment on market rumors or speculation."
Odebrecht, which holds 50.1 percent of Braskem's voting capital, confirmed via email to Plastics News that it intends to keep Braskem as part of the group's investments.
Neither Petroleo Brasileiro SA (Petrobras), which holds 47 percent of the voting capital at Braskem, nor LyondellBasell have immediately responded to requests for comment about the story.
Petrobras has included the sale of Braskem in its divestment plan, which aims to raise $21 million in asset sales by the end of 2018.
Market veterans Craig Blizzard and Phil Karig each said that acquiring Braskem could be a positive move for LyondellBasell.
"At the moment, Braskem's market value is relatively attractive, given the assets and capacity they have in South America," said Blizzard, a former LyondellBasell executive who now operates Blizzard Consulting in Chevy Chase, Md.
He added that LyondellBasell's predecessor companies had mostly withdrawn from South America in the late 1990s and early 2000s and had not re-entered, so South America "is fertile ground."
"A direct presence would give LyondellBasell an edge in exports and make them a true Western Hemisphere player," Blizzard said. "It has the potential to be a good deal if they can make the synergies work."
Karig, managing partner of Mathelin Bay Associates in St. Louis, said LyondellBasell's potential interest in Braskem shows that "it's certainly clear now that polypropylene is no longer the poor relation of polyethylene in the polyolefins family."
He explained that years of no new capacity growth have tightened PP capacity utilization and that PDH-process propylene units have allowed PP to share in the low-cost feedstock benefits of the shale gas revolution.
Although a combined LyondellBasell and Braskem would have around one-third of North American PP production capacity, both Blizzard and Karig said that amount might not be enough for regulators to require a combined firm to divest some of that PP.
Karig said that other resin markets, such as ABS, have already consolidated "to at least that level." He added that North America's feedstock advantage could lead to additional PP plants being built, which would affect market share.
