Yara is about to close the purchase of Petrobras’ fertilizer unit (PETR4), sources tell Reuters

SAO PAULO (Reuters) – Yara Fertilizantes is on the verge of closing a deal for the purchase of the Nitrogen Fertilizer Unit (UFN-III) from Petrobras (PETR3;PETR4) in Três Lagoas (MS), two sources familiar with the matter told Reuters. subject this Friday.

The offer from the Norwegian company, one of the main global players and the fertilizer sector in Brazil, was selected as the winner by Petrobras, and the deal now needs to be approved by the company’s Board of Directors, added one of the sources. The announcement is expected in the coming weeks.

Throughout the sale process, there was interest from at least five companies, two domestic and three foreign groups, sources familiar with the matter told Reuters. Brazil’s Unigel was among them, as Reuters revealed in April.

The sources did not specify the value of the deal, but the deal is expected to be less than $100 million as construction on the unit has yet to be completed.

Relaunched this year after a failure in negotiations with the Russian group Acron, the divestment process of the factory is considered another important step for Brazilian agribusiness, due to the potential reduction in the country’s dependence on fertilizer imports, today around 85%.

The works on the factory began in 2011 and were stopped in December 2014, with 81% completion, due to problems in fulfilling the contract.

The oil company wants to get rid of the business, as it has done with other assets, to focus on oil exploration and production.

When it goes into operation, the unit’s project indicates production capacity of 2,200 tons per day of ammonia and 3,600 tons per day of urea, or about 20% of the apparent consumption of urea in Brazil in 2020.

In Brazil, Yara has five production plants and 24 fertilizer mixing units of its own, with a presence in the main agricultural production centers, according to information on the company’s website.

The location of the Três Lagoas plant is considered strategic, due to its proximity to Bolivia, which would be a supplier of natural gas in a context of global supply increasingly tight due to geopolitical factors.

The market for gas, a raw material used in the production of nitrogen, has been under constant tension in Europe, amid constant threats of reduced supply by the Russians.

In the teaser released in May, with initial information on the transaction for potential buyers, Petrobras says it would offer a gas supply contract to the buyer, who could sign it or seek another solution.

Despite Petrobras claiming that more than 80% of the factory’s construction is completed, those involved in the process say that the conclusion should not be quick, and could take about three years.

Sought, Yara said it does not comment on market rumors. Petrobras did not comment on the matter, saying only that “the binding phase” for the sale of the unit is under way.

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