Giant Brazil Petrochem Fusion Faces Obstacles

RIO DE JANEIRO (Dow Jones)--A much-ballyhooed tie-up between rival petrochemical companies Braskem SA (BAK, BRKM5.BR) and Quattor Petroquimica (SZPQ4.BR) is facing increased obstacles, several Brazilian news outlets reported Thursday.

According to the reports, the consolidation of Brazil's petrochemicals industry into a single giant entity under the Braskem banner was cast in doubt amid a dispute between state-run energy giant Petrobras (PBR) and local industrial conglomerate Odebrecht over control of the new company.

Petrobras has demanded that a company executive be named either chairman or chief executive of the combined Braskem-Quattor, as well as management positions at several key units, local business daily Valor Economico reported. Odebrecht controls Braskem with a 62.3% stake, while Petrobras holds a minority 31% share.

In addition, a member of the Geyer family--which has a 60% stake in Quattor controlling shareholder Unipar (UNIP6.BR)--is vowing to fight the deal in court. Petrobras holds the remaining 40% of Quattor.

Braskem, Petrobras and Quattor have declined to comment further on talks between the companies, referring instead to previous filings with stock regulators that negotiations on a "strategic alliance" have been underway since August 2009.

Quattor is at the center of a second wave of consolidation in Brazil's petrochemicals sector. Braskem and Petrobras first announced interest in Quattor last August, saying the companies had engaged in talks about a strategic alliance. India's Reliance Industries Ltd. (500325.BY) was also rumored to be in talks with Quattor about a possible acquisition.

Braskem and Quattor would have combined revenue of about $30 billion Brazilian reals ($17.4 billion).

Shares of the companies involved were all lower in trading Thursday on the Sao Paulo Stock Exchange, or Bovespa, amid a broader sell-off.

Petrobras shares were down 0.9% at 37.15 Brazilian reals ($21.31) as of 1500 GMT. Braskem shares, meanwhile, slipped 2.1% to BRL14.15 and Unipar shares were off 1.7% at BRL1.19.

-By Jeff Fick, Dow Jones Newswires