By Dana Mattioli and Luciana Magalhaes 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 18, 2018).

Chemical companies LyondellBasell Industries NV and Braskem SA said Friday that they have entered into exclusive talks regarding a potential merger.

In October, The Wall Street Journal reported that Lyondell had made a takeover approach to Braskem, a petrochemical giant and that the sides were in preliminary talks. The talks have been complex given Braskem's ownership structure.

Braskem, which has a market capitalization of $8.7 billion, is co-owned by Brazilian state oil firm PetrĂ³leo Brasileiro SA, known as Petrobras, and construction firm Odebrecht SA. According to the company, Odebrecht controls 50.1% of the voting shares, while Petrobras controls 47%. The company says it is the biggest producer of polypropylene in the U.S.

Braskem's shares rose 21.4% on the news.

LyondellBasell has been negotiating with Odebrecht to buy Braskem, but until now had not been allowed to perform due diligence, which is often a precursor to a merger agreement, according to people familiar with the matter. On Friday, the two companies said they would begin the process of due diligence, negotiating definitive agreements and obtaining corporate approvals.

Still, the companies said the talks were preliminary. When the Journal reported on the talks in October, Odebrecht had indicated it wanted to keep Braskem in its portfolio.

The process could take a few months, according to a person familiar with the matter, and there is no guarantee there will be a deal.

LyondellBasell is a Netherlands-based chemicals-and-polymer producer with a big presence in Houston. It was formed in 2007 when Dutch chemical company Basell International Holdings BV paid $12.7 billion to buy Houston-based Lyondell Chemical Co. The deal loaded the company with more than $20 billion in debt just before commodity markets tumbled in the global financial crisis. A little more than a year after the merger, LyondellBasell filed for bankruptcy. As of Thursday, the company had a market value of about $45 billion.

It emerged from bankruptcy in 2010 after eliminating about $5 billion in debt. Ukrainian-born billionaire Len Blavatnik's holding company, Access Industries, is a significant backer. Recently, executives of the chemical company have indicated they have a big M&A appetite.

Austen Hufford contributed to this article

Write to Dana Mattioli at dana.mattioli@wsj.com and Luciana Magalhaes at Luciana.Magalhaes@wsj.com

 

(END) Dow Jones Newswires

June 18, 2018 02:47 ET (06:47 GMT)

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