11 June 2019

Petrobras still pursuing Liquigás divestment

Petróleo Brasileiro (Petrobras) is due to receive non-binding proposals for Liquigás Distribuidora today after pushing back the deadline for expressions of interest from 6th June, according to a recent Reuters report that suggested private equity houses will be vying with sovereign wealth funds, local investment firms and domestic LPG distributors to acquire Brazil’s number one player in the bottled segment, with a 23 per cent market share, as of September 2018. Sources with knowledge of the matter told the news provider Advent International and Warburg Pincus are expected to take part individually in the first round of bidding, at least, while CVC Capital is working on teaming up with an undisclosed strategic partner. Local companies Itausa Investimentos Itau and Copagaz may also form a consortium to table a proposal that in all likelihood would be up against rival offers tabled by Mubadala Investment or Aygaz of Turkey.

However, Petrobras has placed restrictions on companies already participating in the market for the distribution of bottled natural gas and tanks wishing to take part in the auction: players with a market share of more than 10 per cent can only bid via a consortium and cannot acquire a share corresponding to over 30 per cent of Liquigás’ current sales volume individually. The restrictions are in place to avoid yet another rejection from the Administrative Council of Economic Defence (CADE), which, in February 2018, blocked a 2016 agreement for the sale of Liquigás to Companhia Ultragaz as part of Petrobras’ debt reduction programme. Undaunted, Petrobras has since been weighing alternatives for the divestment in line with strategic plans to improve the group’s overall business portfolio by withdrawing entirely from the LPG distribution arena. 

Founded in 1953 and headquartered in São Paulo, Liquigás has a presence in 24 Brazilian states and in the Federal District through 23 operating centres, 16 warehouses and one road/rail storage facility and loading base, among others. The company is the number one player in the bottled segment – where it serves residential customers through 5,000 direct resellers. It is third in the bulk category – in which it has about 21,000 clients in the commerce, industry, condominium, agribusiness and services sectors – with 18 per cent of the market. According to the updated sales teaser released in April, Liquigás had net revenue of BRL 4,780 million (USD 1,231 million) in the 12 months ended 31st December 2018 (FY 2017: BRL 3,990 million; FY 2016: BRL 3,590 million) and earnings before interest, tax, depreciation and amortisation (EBITDA) of BRL 274 million (FY 2017: BRL 198 million; FY 2016: BRL 320 million).

Petrobras has been selling assets left right and centre with the aim of reducing the net debt to adjusted EBITDA for the last 12 months ratio to 1.5x by 2020. As at 31st March 2019, gross debt totalled USD 106,010 million while net debt amounted to USD 95,530 million. In the first four months of the year, divestments reached USD 11,300 million, representing a record for Petrobras, and the highest value deal was the sale of 90 per cent of Transportadora Associada de Gás for USD 8,600 million, which Zephyr, the M&A database published by Bureau van Dijk, shows is the tenth-largest merger and acquisition targeting a Brazilian company on record.

© Zephyr