Petrobras $5.2 Billion Deal With Brookfield Halted by Court

  • Brookfield-led group agreed to buy gas distribution unit
  • Petrobras divestment program has suffered legal challenges

Petroleo Brasileiro SA’s $5.2 billion sale of a natural gas distribution unit to Brookfield Asset Management Inc. and other investors has just hit a legal snag.

A Brazilian federal judge granted an injunction against the acquisition of Nova Transportadora do Sudesteon Friday on grounds that the sale wasn’t sufficiently publicized to foster competition, according to a copy of the court decision reviewed by Bloomberg. Petrobras is taking the necessary legal steps to protect its interests and those of its shareholders, the Rio de Janeiro-based oil producer said in a statement.

Petrobras’s plan to restore financial health through a massive divestment program has been facing legal challenges since late 2016 when Brazil’s audit court, known as TCU, suspended all asset sales not in the final stages of negotiations. A separate regional court has temporarily suspended some divestments including the sale of two offshore fields to Karoon Gas Australia Ltd.

The producer has been dumping assets in an effort to reduce its massive debt load that led to the loss of its investment grade rating.

“They might have to come up with a different strategy and make it more transparent, which is what the courts are demanding,’’ said Horacio Cuenca, a Rio de Janeiro-based analyst at Wood Mackenzie Ltd. “In one way or another, I’m sure the company will go ahead.”

Fire Sale

Petrobras has previously said it would incorporate recommendations from the audit court and reiterated its plan to sell about $35 billion in assets from 2015 through 2018.

Nova Transportadora supplies gas to Brazil’s most populated and industrialized states of Sao Paulo, Rio de Janeiro and Minas Gerais. When the deal was announced in September, Brookfield said it was a unique opportunity to participate in a natural gas market that will grow substantially by 2030 as Brazil develops associated gas at giant offshore fields.

The bankers who control Brazilian banking giant Itau Unibanco Holding SA are in talks with Brookfield to join the deal, people with direct knowledge of the matter said this week.

Brookfield Infrastructure Partners LP, a unit of Canada’s largest alternative asset manager, is leading the group of buyers including CIC Capital Corp. and GIC Private Ltd. that has agreed to take a 90 percent stake in Nova Transportadora

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