July 23, 2019 / 3:08 PM / 5 months ago

Petrobras to privatize Brazil's top gas seller in $2 bln share sale

RIO DE JANEIRO, July 23 (Reuters) - Brazil’s state-run oil company Petroleo Brasileiro SA is set to relinquish control of the country’s biggest fuel distributor in a Tuesday share offering, pushing ahead with a privatization drive under new Chief Executive Roberto Castello Branco.

Petrobras, as the company is widely known, will effectively privatize its listed subsidiary Petrobras Distribuidora SA in the secondary share offering set to price after markets close. The parent company plans to auction off 25% of Petrobras Distribuidora shares, which would bring in roughly 7.43 billion reais ($1.97 billion) at Monday’s closing price.

That percentage could increase to 33.75% via overallotment provisions. Supplementary and additional allotments will be allocated by Aug. 28, according to the prospectus.

As Petrobras now holds 71.25% of the fuel distributor’s shares, the unit will cease to be a state-run company.

Petrobras Distribuidora has over 8,000 gas stations operating under its trade name, BR Distribuidora.

The current management of Petrobras, which was appointed in January by President Jair Bolsonaro, is aggressively exiting downstream and midstream businesses to sharpen its focus on offshore oil exploration and production.

Analysts at UBS AG and Banco Bradesco SA have “buy” and “outperform” ratings on Petrobras Distribuidora, with price targets of 30 and 35 reais, respectively. Both say privatization will free the firm of some onerous legal obligations.

“Personnel costs should fall after privatization, as (the company) will be free to follow its own hiring process rather than public-tender hiring and the dismissal process will be significantly less complex than the current one,” wrote UBS analysts led by Luiz Carvalho.

The offering will be led by the investment banking units of JPMorgan Chase & Co, Citigroup Inc, Itau Unibanco Holding SA, Bank of America Corp, Credit Suisse Group AG and Banco Santander Brasil SA. ($1 = 3.76 reais) (Reporting by Gram Slattery Additional reporting by Paula Laier in Sao Paulo Editing by Brad Haynes and Jonathan Oatis)

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