Exclusive: Norway’s Yara set to acquire Brazil’s Petrobras fertilizer unit


A man walks in front of the headquarters of Petroleo Brasileiro SA (Petrobas) in Rio de Janeiro, Brazil March 9, 2020. REUTERS/Sergio Moraes/File Photo

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SAO PAULO/RIO DE JANEIRO, Sept 9 (Reuters) – Yara International ASA (YAR.OL) is set to acquire the fertilizer unit put up for sale by state oil company Petroleo Brasileiro SA (PETR4.SA) , known as Petrobras, two sources with knowledge of the matter said on Friday.

Petrobras selected Yara’s bid and the deal must now be approved by the company’s board, one of the sources said. An announcement is expected in the coming weeks.

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

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

Yara already has five factories in Brazil and 24 blending facilities. It also has mining and port operations.

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

The sources did not specify the value of the transaction, but said it would be less than $100 million, as the unit is not yet operational.

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

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

Brazil is heavily dependent on fertilizer imports. Construction of the fertilizer unit in the city of Tres Lagoas began in 2011 and was halted in 2014 with 81% complete after Petrobras canceled a contract alleging the companies were non-compliant.

When operational, the unit should produce 2,200 tons of ammonia and 3,600 tons of urea per day, or about 20% of the country’s urea consumption. The unit should be completed within two to three years.

Petrobras is expected to offer the buyer an option to purchase the unit with a natural gas supply contract. The state-controlled company had a larger fertilizer business, but began to divest in 2018. Interest in fertilizer companies increased after war in Ukraine cut off supply and increased fertilizer prices.

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Reporting by Tatiana Bautzer and Rafaella Barros; Editing by Josie Kao and Leslie Adler

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