Petrobras Is Paying Too Much for Reserves, Minority Shareholder Group Says
Petroleo Brasileiro SA, Latin America’s largest company by market value, is overpaying the government for crude reserves in a $42.5 billion oil-for-stock deal, the Brazilian association of minority shareholders said.
“The price of the barrel was lower than what the government wanted, but it’s still going to cause a serious dilution and minority shareholders will be forced to spend more than what we think is reasonable to keep their stake in the company,” Edison Garcia, head of Brazil’s Minority Shareholders Association, said in a phone interview today.
Petrobras, based in Rio de Janeiro, agreed to pay an average of $8.51 per barrel for reserves the government will sell in exchange for stock. The value will determine how many new shares Petrobras offers minority investors in a related public offering to raise funds for a $224 billion investment plan to develop offshore fields and increase refinery capacity.
“The transaction was really bad in terms of corporate governance. Considering all the parties involved, the government will have more than 50 percent of the total capital,” said Daniella Marques, a partner at Oren Investimentos in Rio de Janeiro.
The Brazilian government owns 56 percent of the voting shares of Petrobras and 32 percent of the total shares.
Conflict?
The transaction is also marred by a conflict, said Garcia, whose organization is known as AMEC. Fabio Colletti Barbosa, chief executive officer of Banco Santander Brasil SA, the Brazilian unit of Spain’s biggest bank, sits on the board of Petrobras as a representative of minority holders of common shares, while Santander is one of the managers of the offer, said Garcia.
Officials for Santander didn’t return a phone call for comment.
Brazil’s market regulator should also have examined whether it was appropriate for government officials to comment about the expected price for each barrel of oil, Garcia said.
Haroldo Lima, head of Brazil’s oil regulator ANP, said on Aug. 25 that the government favored a price above $8. Petrobras’s share price fell 2.5 percent after his comments. Energy Minister Marcio Zimmermann told journalists on Aug. 16 the price of the barrel in areas that are similar to the reserves in the offer was about $10.
Securities Regulator
The market regulator, known as CVM, will analyze the oil- for-stock swap as well as the public offering once the transactions are completed, according to an e-mailed statement in response to questions from Bloomberg News.
“As for comments made by people who are not managers of the listed company, CVM’s sanctioning power has no reach over them, even if they interfere with market conditions,” read the statement.
Petrobras rose 2.4 percent to 27.69 reais at 3:37 p.m. in Sao Paulo trading, after gaining 3.7 percent yesterday.
AMEC was created in 2006 to defend the rights of minority shareholders in Brazil. Its members include 40 asset managers.
To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net
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