What happened
Brazilian petrochemical manufacturer Braskem (NYSE: BAK) is reportedly the target of a $7.6 billion buyout. Investors are trading on the reports, sending the shares up as much as 23% on Monday morning.
So what
Braskem, founded 20 years ago with the consolidation of six petrochemical businesses owned by large Brazilian corporations, today ranks as one of North America's largest producers of thermoplastic resins and polypropylene. The company's shares took off on Friday after reports surfaced that Abu Dhabi National Oil Co. and Apollo Global Management (NYSE: APO) had submitted an offer for Braskem.
On Monday, Braskem confirmed that controlling shareholder Novonor had received a non-binding offer to acquire Braskem. The companies didn't disclose who had submitted the offer and said it's a fluid process with no guarantee of a sale.
Now what
There's a lot we don't know about this reported offer, and investors should remain cautious. There's logic to the deal, and Abu Dhabi National has been looking to expand its geographic and product diversity. But Braskem could be a difficult target to negotiate for.
Novornor and Petroleo Brasileiro, the two entities that created Braskem two decades ago, have not seen eye to eye about what to do with the asset in the past. The two pulled a proposed share sale last year because they couldn't agree on a price.
There's definite interest in Braskem, but investors looking to jump in now, based on the excitement, need to be aware that a lot can go wrong from here.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
