July 23, 2019 / 8:58 PM / a month ago

Petrobras to privatise Brazil's top gas seller in $2 billion share sale

SAO PAULO/RIO DE JANEIRO (Reuters) - Brazilian state-run oil company Petroleo Brasileiro SA (PETR4.SA) is set to relinquish control of the country’s biggest fuel distributor in a share offering due to be priced late on Tuesday, pushing ahead with a privatisation drive under new Chief Executive Roberto Castello Branco.

FILE PHOTO: A logo of the Brazil's state-run Petrobras oil company is seen in Rio de Janeiro, Brazil March 25, 2019. REUTERS/Sergio Moraes

Each of Branco’s three predecessors discussed privatising Petrobras Distribuidora SA (BRDT3.SA). The share offering of the gas station chain underscores the new government’s commitment to an array of public asset sales in industries ranging from energy to finance.

Petrobras, as the company is known, plans to sell 25% of shares in Petrobras Distribuidora, which would bring in roughly 7.57 billion reais ($2 billion) at Tuesday’s closing price.

Shares rose 2% on Tuesday to 26 reais, ahead of the offering pricing.

The stake sale could increase to 33.75% via overallotment provisions, raising up to 10.2 billion reais ($2.7 billion). Supplementary and additional allotments will be allocated by Aug. 28, according to the prospectus.

The fuel distributor, also known as BR Distribuidora, owns 17.7% of all gas stations in Brazil, according to oil regulatory agency ANP data. Its closest rival is Ipiranga, controlled by Ultrapar Participações SA (UGPA3.SA), with 14% of gas stations.

The sale of state-owned assets is expected to drive mergers, acquisitions and share offerings in Brazil in the second half of the year, bankers and investors said, after a slower-than-expected first half.

Petrobras management, appointed by President Jair Bolsonaro in January, is aggressively exiting downstream and midstream businesses to sharpen its focus on offshore oil exploration and production.

Analysts at UBS AG and Banco Bradesco SA have “buy” and “outperform” ratings on Petrobras Distribuidora, with price targets of 30 and 35 reais, respectively. Both say privatisation will free the firm of some onerous legal obligations.

“Personnel costs should fall after privatisation, as (the company) will be free to follow its own hiring process rather than public-tender hiring and the dismissal process will be significantly less complex than the current one,” wrote UBS analysts led by Luiz Carvalho.

The offering will be led by the investment banking units of JPMorgan Chase & Co, Citigroup Inc, Itau Unibanco Holding SA, Bank of America Corp, Credit Suisse Group AG and Banco Santander Brasil SA.

($1 = 3.76 reais)

Reporting by Tatiana Bautzer and Paula Laier in Sao Paulo and Gram Slattery in Rio de Janeiro; editing by Brad Haynes, Jonathan Oatis and Sonya Hepinstall

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