M&A Category
 
Winner: Ipiranga’s break up
 
The deconstruction of the Ipiranga Group represents the biggest, most spectacular shake up of Brazil’s petrochemicals sector in two decades.
 
What had been a leading presence in the country’s petrochemicals and energy distribution industries was shared out between three of Brazil’s icons – state-owned oil company Petrobras, Latin America’s number one petrochemicals group Braskem, and the Ultra Group, Brazil’s largest liquefied petroleum gas distributor. Today there is a clean split of ownership, but getting there was a drawn-out, disjointed affair.
 
Ipiranga’s family owners had been keen to offload the group’s companies for some time. Given previous attempts had failed, when Ultra approached them about buying a section of Ipiranga’s distribution network, they insisted on only selling Ipiranga’s three companies together.
 
Ultra duly sorted out buying partners for the petrochemical assets and the distribution channels it didn’t want, bringing in Braskem and Petrobras, but the sellers maintained that Ultra should act as the sole buyer. Ultra complied, behaving as an agent for Braskem and Petrobras.
 
The three buyers had to draw up an investor agreement under which all the assets would be transferred to Ultra, which would then begin the corporate restructuring required to separate the assets and divvy them out as agreed. “negotiating the agreement was very complicated,” remarks one lawyer. “Up for consideration was how to manage the assets during the transition process, the antitrust elements and the possible opposition of minority shareholders.”
 
The share acquisition was split into complex stages. First, Ultra bought the shares held by the five families controlling Ipiranga. Then it made a public offer to buy common shares from Ipiranga’s 60 minority shareholders.  With this first stage of the transaction completed, the deeds of the three Ipiranga companies were in the hands of Ultra. The next task was to restructure the assets to enable their division, a process complicated by Ipiranga’s previous corporate structure designed to allow shareholding control by multiple families rather than for efficiency.
 
Upon completion of the transaction, Ultra became the second-largest fuel provider in the country, with a 15 per cent market share. Braskem’s control of the Brazilian thermoplastic resins market rose to over 50 per cent.
 
Petrobras already had a market share of about 98 per cent in Brazil’s refinery market. Clearly three dominant players buying such key assets in their sectors were going to be subject to close scrutiny from regulators.
 
Indeed the country’s competition regulator CADE did show a keen interest, but in July last year it approved a string of deals paving the way for the sales to proceed, followed by a subsequent approval relating to Petrobras in December.
 
In total, the acquisition cost US$4 billion. Petrobras paid US$1.3 billion cash, Braskem US$1.1 billion, and Ultrapar issued over 50 million new shares to finance its part of the deal.
 
There was more than commercial gain spurring the transaction. Not only does it symbolise the Brazilian government’s plans to create and strengthen national champions across a range of sectors, the transaction is integral to the reorganisation of Brazil’s petrochemicals sector that has been ongoing since the 1997 petroleum law drew an end to Petrobras’s monopoly.
 
Counsel to Ipiranga
 
In-house counsel
general counsel Sérgio Roberto Weyne Ferreira da Costa
 
Pinheiro Neto Advogados
Partners Antonio Mendes, Carlos Alberto Moreira Lima Jr, Cristianne Saccab Zarzur and Giancarlo Chamma Matarazzo, and associate Pythagoras Carvalho
 
Counsel to Ipiranga shareholders
 
Gouvêa Vieira Advogados
Partners Vitor Rogério da Costa and Pedro Vitor Araújo da Costa
 
Counsel to Petrobras
 
In-house counsel
M&A legal manager Andrea Damiani, coordinator Antonino Medeiros, junior attorneys Elisaura Fernandes da Silva and Diogo Favacho, Fernando Vigneron Villaça for litigation and Cristiano Gadelha for tax
Motta, Fernandes Rocha – Advogados for corporate advice
Partners Luiz Leonardo Cantidiano and Oswaldo de Moraes Bastos Sobrinho, and associates Caio Machado Filho and Gustavo Oliveira
Xavier, Bernardes, Bragança, Sociedade de Advogados for tax matters
Partners Alberto Xavier and Roberto Duque Estrada, and associate Renata Emery
Levy & Salomão Advogados for competition advice
Partners Amadeu Ribeiro, Aurélio Marchini Santos and Maria Eugênia Novis, and associate Ricardo Franco Botelho
 
Counsel to the Ultra Group (Ultrapar)
 
In-house
general counsel Ângela Antonioli Pêgas and Denize Sampaio Bicudo
 
Machado, Meyer, Sendacz e Opice Advogados
Partners José Roberto Opice, Celso de Paula F da Costa, Carlos José Rolim de Mello, and associates Raquel Newton Camara, Fabio Wagner and Arthur Bardawil Penteado, with partner Tito Amaral de Andrade and associate Gustavo Noman for competition advice, and associate Roberta Danelon Leonhardt for environmental advice
 
US
Davis Polk & Wardwell
Partners Andrés Gil, Dianne Kerr, Joseph Hall and Kathleen Ferrell, and associates Diego Rotsztain, Patrick Jackson, Pheabe Morris, Diane Young, Rosa Neel and Rachel Strum
 
Counsel to Braskem
 
In-house counsel
general counsel Mauricio Ferro, Marta Pacheco and Cristiane Silvestre
Barbosa Müssnich & Aragão for corporate advice
Partners Luiz Antonio de Sampaio Campos and Mauro Teixeira Sampaio, and associates Henrique Beloch, Rafael Calabria and Pedro Costa
Mattos Muriel Kestener for competition advice
Partners Ubiratan Mattos and Maria Cecilia Andrade, and associates Pedro Vicentini and Caroline Sanselme Vieira
 
Counsel to Ipiranga, Ultra Group and Braskem for litigation matters
 
Wald e Associados Advogados
Partners Alexandre de Mendonça Wald, Luiza Rangel de Moraes, Mariana Tavares Antunes, Armando Guimarães de Almeida Neto and André de Luizi Correia, and associates Marina Gaensly, Rodrigo Ribeiro Fleury, Liana Gorberg and Samantha Mendes Longo
 
(LATINLAWYER 24.02.2009)