State-controlled Petróleo Brasileiro SA has entered exclusive talks with Brookfield Asset Management Inc (BAMa.TO) over the sale of natural gas pipeline subsidiary Nova Transportadora do Sudeste SA, as part of a plan to dispose of US$15 billion of non-essential assets by year-end.
In a Thursday securities filing, Petrobras (PETR4.SA), as Brazil’s state oil producer is known, set an exclusivity period for negotiations initially at 60 days that could be extended for another 30 days. Terms of the transaction were not disclosed.
Reuters reported on Wednesday, citing sources, that Brookfield had offered 18 billion reais (US$5.2 billion) to buy NTS, as the unit is known, trumping rival bids. According to the sources, who requested anonymity to speak freely about the deal, other bidders included Spain’s Gas Natural Fenosa SA, France’s Engie SA (ENGIE.PA) and Japan’s Mitsui & Co Ltd (8031.T).
A sale of NTS could give a boost to Petrobras, which is relying on asset sales and cost cuts to reduce a debt burden of US$130 billion, the largest of any global oil firm. So far this year, Petrobras has sold US$1.4 billion in assets, with ratings company Moody’s Investors Service saying the slow pace of divestitures could hamper debt-reduction efforts.
According to the filing, a sale of NTS requires approval by Petrobras management and board, as well as from regulators.
Brookfield’s purchase of NTS, with nearly 1,560 miles (2,500 km) of pipelines, could be the country’s biggest corporate takeover so far this year, according to Thomson Reuters data.
Non-voting shares of Petrobras closed 4.5 percent down on Thursday at 9.79 reais. The stock is down 25 percent this year.
The company posted a net loss of 1.25 billion reais in the first quarter, the third consecutive quarterly loss, after oil prices and production slipped and a weaker currency fanned debt costs.
By Tatiana Bautzer
(Additional reporting by Guillermo Parra-Bernal in São Paulo; Editing by Sandra Maler and Tom Brown)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Paulo Whitaker