Ecopetrol’s Brazil Takeover Stalls Over What Minorities Get Paid

Markets

Colombia’s national oil company is being blocked in Brazil. The reason is not politics, antitrust or nationalism.

The Ecopetrol Brava Energia takeover has stalled on a single question of company law. That question is whether one buyer may pay two prices.

Brava told the market on the evening of 7 July that the regulator’s technical staff had held their ground. Ecopetrol’s appeal now goes to the full board of the Comissão de Valores Mobiliários, and the offer stays suspended until it rules.

Brava says it knows of no change to the terms already announced. What changes, if the board sides with the staff, is the price.

How the Ecopetrol Brava Energia deal was built

The structure has two legs. In April, according to Ecopetrol’s filing with American regulators, it signed private contracts to buy about 26% of Brava from three groups of large funds.

In May its Brazilian subsidiary launched a public tender on the São Paulo exchange. It sought a further 116 million shares at 23 reais each, a premium of about 21% over the previous 90 days of trading.

Add the legs together and Ecopetrol reaches exactly 51%, which is control. The public leg is worth about R$2.67bn ($519m) and is meant to be paid with a bridge loan.

Ecopetrol’s case is that these are two separate transactions. The regulator’s registration superintendency says they are inseparable, a single control purchase dressed in two documents.

Why the distinction is worth hundreds of millions

Brazilian company law contains a protection called tag-along. When control of a listed company changes hands, the buyer must offer the other voting shareholders at least 80% of the price paid for the control block.

The regulator’s own rulebook then defines a transfer of control, in Instruction 361. It covers the operation “or the set of operations” through which a third party, or a set of third parties with the same interest, acquires control.

That phrase is the entire dispute. Read plainly, it captures exactly what Ecopetrol has done, and the staff are reading it plainly.

The same rulebook adds a catch-all. The regulator may impose a control tender whenever it finds control has in fact been sold for money, whatever shape the paperwork takes.

The clause nobody has mentioned

There is a detail in Instruction 361 that changes the arithmetic of delay. In cash deals the offer price must equal at least 80% of the price paid to the controller, plus interest at the Selic rate.

That interest runs from the day the controller was paid to the day the public offer settles. Brazil’s policy rate has been near 15%.

If the board sides with its staff, the April purchase becomes the reference point. The statutory floor beneath the minorities has then been growing since April.

Every week Ecopetrol spends arguing makes the outcome it opposes more expensive. That cuts both ways, and it explains the tone of the Colombian company’s response.

It has expressed respectful disagreement and promised to appeal with maximum speed. It also said it remains confident the offer will proceed as first proposed.

What is actually at stake for a foreign reader

Brava is not a small prize. Formed in 2024 from the merger of two Brazilian producers, it reported EBITDA of $806m for last year, on a margin of 39%.

Colombia’s reserves are shrinking and its government is cool on new drilling. So Ecopetrol is buying production in a country where output still grows, and the appeal does not change that logic.

The precedent is what matters. Win, and control of a Brazilian company can be assembled in two legs, one private and generous, one public and less so.

Lose, and that route closes for every acquirer that follows. For an investor pricing Brazil, a regulator willing to freeze a state-backed foreign bid to protect small shareholders is a reassurance rather than a risk.

Why did the CVM suspend the Ecopetrol Brava Energia offer?

Its staff concluded that the private share purchases and the public tender form one control transaction. That would require minorities to be offered a price tied to what the large sellers received.

What happens if Ecopetrol loses the appeal?

It must amend the offer or see the registration cancelled. The statutory floor is 80% of the control price plus accrued interest, so the amendment would cost money.

Is the takeover dead?

No. The offer is frozen, not cancelled, and Brava says the announced conditions still stand pending the board’s decision.

Frequently Asked Questions

What are the two parts of Ecopetrol's deal to acquire Brava Energia?

Ecopetrol agreed in April to buy 26% of Brava privately. It then launched a public offer for 116,110,717 shares at R$23.00 ($4.47) per share to reach a total stake of 51%.

The public portion alone is worth about R$2.67 billion ($519 million). That is roughly a quarter of the company.

Why has Brazil's securities regulator blocked the Ecopetrol-Brava takeover offer?

Regulator staff hold that Brava’s private contracts and the public offer together form one indivisible control transaction. That triggers equal treatment requirements under Brazilian law.

Article 254-A obliges a buyer of control to offer minority shareholders at least 80% of the price paid to the control block.

What is the current status of Ecopetrol's appeal and the suspended offer?

Brava announced on 7 July that Ecopetrol’s appeal has gone to the full board of the Comissão de Valores Mobiliários, after technical staff held their ground. The public offer stays frozen until the full board rules.

Brava has stated it knows of no change to the terms already announced.