Petrobras to Raise US$2.32 Billion from Sale of Stock in its Service Station Chain

RIO DE JANEIRO, BRAZIL – Petrobras announced, on Wednesday, July 3rd, the start of the process of reducing its shareholding in its subsidiary BR Distribuidora, by publishing the preliminary prospectus for the public offer of secondary distribution of common shares.

Petrobras Distribuidora or BR is the largest distributor and marketer of petroleum derivatives and biofuels of Brazil and Latin America. A subsidiary of Petrobras, the company has more than 34,000 gas stations in Brazil and has an annual turnover of more than US$25 billion. It was founded in 1971 and is headquartered in Rio de Janeiro.

“The core offering of shares will be 25 percent, and may reach 33.75 percent of the company’s capital stock, depending on additional and supplemental lots,” Petrobras said.

With this, the shareholding participation of the state-owned company in BR should go from the current 71 percent to 46 percent or even 38 percent. Until now, Petrobras had only reported that it would reduce its share to less than 50 percent.

The total offer of shares will depend on the exercise of optional additional and supplemental lots. By reducing its stake to less than 50 percent, Petrobras will, in practice, be giving up total control of the subsidiary.

As a result of the operation, Petrobras will be able to raise up to R$9.28 billion (US$2.32 billion), according to Reuters. Given the closing price of Tuesday’s BR common shares, at R$23.60 (US$5.90) per unit, the offer would raise between R$6.87 billion (US$1.72 billion) and R$9.28 billion (US$2.32 billion).

Petrobras expects to price the offer on July 23rd. Supplemental and additional lot sales may be completed by August 28th, according to the document.

A total of 291.25 million shares will be offered, in addition to approximately 43.687 million shares in the supplemental lot and 58.25 million in the additional lot, states Reuters.

“The request for registration of the offer is currently under CVM review, and the offer is subject to its prior approval. No registration of the offer or the shares will be made in any agency or regulatory body of the capital market of any other country, except in Brazil, with the CVM approval”, he added.

The state-owned company went public with BR Distribuidora at the end of 2017. At the time, the oil company gave up almost 30 percent of its stake in the company. The operation yielded R$5 billion (US$1.25 billion).

The state-owned oil company’s board of directors approved in May the sale of an additional stake in BR, reducing its stake in the company to less than 50 percent.

The offer is part of a broad program of disinvestments by Petrobras that has been taking place in recent years, but which has been intensifying during the government of Jair Bolsonaro, who appointed conservative economist Roberto Castello Branco to preside over the company.

The state-owned company has already announced the sale of eight of its thirteen refineries to raise some US$15 billion. In March, Petrobras also announced that it plans to reduce its operating costs by US$8.1 billion.

The administration seeks to raise funds through the sale of non-core assets to focus its efforts on the exploration and production of oil and gas in deep and ultra-deep waters, with high profitability.