LyondellBasell, Braskem confirm merger talks

There’s a potential merger brewing between two petrochemicals giants.

LyondellBasell Industries and Odebrecht S.A., the controlling shareholder of Brazil-based Braskem SA, have confirmed that the companies have entered into exclusive talks regarding a potential merger that would give LyondellBasell a controlling stake in Braskem.

Braskem is co-owned by Brazilian state oil firm Petróleo Brasileiro SA, known as Petrobras, and construction firm Odebrecht SA. Braskem is said to be the largest producer of polypropylene in North America.

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.

Headquartered in the Netherlands, LyondellBasell was formed in 2007 when Dutch chemical company Basell International Holdings BV acquired Houston, Tex.-based Lyondell Chemical Co.

“Both LyondellBasell and Braskem share a strong culture of operational excellence and legacies of value-creating innovation,” the companies said in a joint statement. “We believe that the potential combination of LyondellBasell’s and Braskem’s complementary strengths, product portfolios and operational footprints would create significant value for our shareholders, customers and employees.”

The statement also noted that the discussions were in the early preliminary stages, and that no agreements have been reached. “Among other things, the parties will need to complete appropriate diligence, negotiate definitive agreements and obtain corporate approvals,” it said. “There can be no assurance the discussions will result in a transaction or on what terms any transaction may occur.”