Petrobras plumps for Yara’s bid for its fertiliser unit

Sao Paulo/Rio de Janeiro — Yara International is close to acquiring the fertiliser unit put on sale by state-controlled oil company Petroleo Brasileiro, known as Petrobras, two sources with knowledge of the matter have said.

Petrobras has selected Yara’s bid and the deal now needs to be approved by the company’s board, one of the sources said. An announcement is expected over the next weeks.

Yara declined to comment on “market rumours”. Petrobras declined to comment on the choosing of Yara’s proposal, referring to its latest filing in late August in which it said the companies could present binding proposals.

In a statement on Friday, Petrobras denied imminence of a sale, adding the process is in the binding phase, “having not reached the stage of receiving proposals”.

Yara already owns five plants in Brazil and 24 mixing facilities. It also owns mining and port operations.

The Petrobras fertiliser unit, known as UFN-III, is based in Mato Grosso do Sul state, one of Brazil’s largest grain producers.

The sources did not specify the deal value, but said it will be lower than $100m, since the unit is not yet operational.

Petrobras has been trying to sell the unit for some time. In February it agreed to sell it to Russian group Acron, but the deal collapsed. In May the oil company relaunched the process with advisory of the investment banking unit of Banco Bradesco.

Other companies interested in the deal included Brazilian group Unigel and steelmaker CSN. The final deal announcement has been delayed due to recent changes in Petrobras’s board.

Brazil is dependent on fertiliser imports. Construction of the fertiliser unit in the city of Tres Lagoas began in 2011 and was stopped in 2014 with 81% completed after Petrobras rescinded a contract alleging companies were not compliant.

When operational, the unit is expected to produce 2,200 tonnes of ammonia and 3,600 tonnes of urea daily, about 20% of the urea consumption in the country. The unit is expected to be completed within two to three years.

Petrobras is expected to offer the acquirer an option of buying the unit with a natural gas supply contract. The state-controlled company had a larger fertiliser business, but began divesting in 2018. Interest for fertiliser businesses has risen after the Ukraine war interrupted supply and raised fertiliser prices.

Reuters