March 21, 2019 / 3:53 PM / 6 months ago

Lyondell, Odebrecht talks on Braskem slowed by SEC filing, naphtha issues- sources

SAO PAULO, March 21 (Reuters) - Brazilian conglomerate Odebrecht SA’s efforts to sell petrochemical maker Braskem SA to LyondellBasell Industries NV may take months longer than expected because of issues linked to a delayed U.S. filing and a supply contract, three sources with knowledge of the matter said.

The talks to sell Odebrecht’s controlling stake are the first step in an $11 billion deal Lyondell aims to complete to create the world’s largest petrochemical company and would also involve state oil company Petroleo Brasileiros SA, Braskem’s other big shareholder.

Lyondell will only be able to extend the offer to Petrobras, which owns a 36 percent stake in Braskem, once Odebrecht agrees to a deal.

Odebrecht, which has been trying to restructure after being implicated in Brazil’s sweeping “Car Wash” scandal, has been discussing the deal with Lyondell for a year and a half. Speculation about the transaction has helped boost Braskem shares by 16 percent over the last 12 months.

Odebrecht is talking to Lyondell about a price for its shares as well as the overall structure of the deal, the sources added, asking for anonymity to disclose the private talks in recent days.

Lyondell’s board has already decided that it will not conclude the deal before Braskem files its 2017 20F annual report with the U.S. Securities and Exchange Commission, one source said. Braskem has not been able to file the document with the SEC yet due to its auditors’ ongoing assessment of its internal controls.

Braskem signed a leniency agreement with U.S., Brazilian and Swiss prosecutors in late 2016 to settle corruption charges also involving Odebrecht. The company’s ADRs may be delisted by the New York Stock Exchange if it does not file the 20F by May 15.

Another drag on the deal is the delay in the signing of a long-term supply contract of naphtha, a key raw material for Braskem, with Petrobras. Roberto Castello Branco, the oil company’s new chief executive, has yet to signed a draft contract left by his predecessor Ivan Monteiro.

Although Odebrecht initially intended to swap its full stake for LyondellBasell shares, the conglomerate’s financial health has deteriorated and it will need some cash to meet the group’s needs.

Odebrecht declined to comment. LyondellBasell and Petrobras did not immediately respond to a request for comments. ($1 = 3.7711 reais) (Reporting by Tatiana Bautzer; Editing by Christian Plumb and Susan Thomas)

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