This excerpt taken from the PBR 6-K filed Aug 15, 2007.
7. Acquisition of Ipiranga Group Shares
On April 18, 2007, Ultrapar (by itself), with the intervention of Braskem S.A. and Petróleo Brasileiro S.A. Petrobras (by mandate) acquired control of the Ipiranga group companies. The value of the transaction was R$ 5,486 million, divided into three installments. On the same date, Ultrapar, Braskem and Petrobras made the first payment of R$ 2,071 million, relative to the acquisition of the shares retained by the controlling shareholders of Grupo Ipiranga, of which Petrobras share was R$ 743 million.
Pursuant to the agreement between Ultrapar, Braskem and Petrobras, Ultrapar will control the fuel and lubricant distribution businesses in the South and Southeast regions (Southern Distribution Assets) belonging to Distribuidora de Produtos de Petróleo Ipiranga (DPPI) and Companhia Brasileira de Petróleo Ipiranga (CBPI); Petrobras will control the fuel and lubricant distribution businesses in the North, Northeast and Midwest regions (Northern Distribution Assets) belonging to Distribuidora de Produtos de Petróleo Ipiranga (DPPI) and Companhia Brasileira de Petróleo Ipiranga (CBPI); and Braskem will control the petrochemical assets represented by Ipiranga Química S.A., Ipiranga Petroquímica S.A. (IPQ) and the latters interest in Companhia Petroquímica do Sul (Copesul). Petrobras will also retain an interest in these petrochemical assets. The assets related to oil-refining operations belonging to Refinaria de Petróleo Ipiranga (RPI) will be jointly controlled by Petrobras, Ultrapar and Braskem.
The transaction was presented to the Brazilian antitrust authorities (CADE - Conselho Administrativo de Defesa Econômica; SDE - Secretaria de Direito Econômico; and SEAE - Secretaria de Acompanhamento Econômico SEAE) in line with the terms stipulated by the prevailing legislation.
Ultrapar is responsible for executing the corporate restructuring of the acquired companies in order to separate the assets attributed to each of the acquiring companies, as follows:
(a) A Public Tender Offer (OPA) to acquire the common shares issued by RPI, DPPI and CBPI;
Currently, the operation is in the stage of the OPA for the acquisition of the common shares issued by RPI, DPPI and CBPI. The OPA registration request was filed with the CVM (Brazilian Securities and Exchange Commission) on May 2, 2007 and is currently being examined by that body.
Regarding the petrochemical assets, on April 18, 2007, Petrobras and Braskem filed an OPA request for the delisting of Copesul with the CVM, which is also currently being examined. In the case of IPQ, on May 18, 2007, the same companies filed an OPA request permitting the private acquisition of the shares held by the minority shareholders on June 28, 2007, with financial settlement and transfer of the shares by the shareholders. The value of the transaction was estimated at R$ 118 million and the acquisition vehicle was a company constituted for this specific purpose: EDSP67 Participações S.A., controlled by Ipiranga Química S.A. On July 4, 2007, the CVM granted the OPA request and IPQ was delisted on July 18, 2007.
Following the first stage of the acquisition, regarding the petrochemical businesses, Petrobras retained 8.04% of the total capital and 27.13% of the voting capital of Ipiranga Química, recording the payment installment of R$ 429 million as an advance to the Investment group and recognizing equity income in the amount R$ 8 million, as well as the amortization of the respective goodwill in the amount of R$ 4 million. The latter amount was arrived at considering the payment made in the first stage, the expected transaction total, the percentage of total capital, used to calculate equity income, and Petrobras interest at the end of the process (40%).
In relation to the refining businesses, Petrobras retained 10.01% of the total capital of RPI, consolidating proportionally the pro-forma accounting statements of the refining assets of RPI in light of the joint control exercised by Petrobras, Braskem and Ultra. Goodwill in the amount of R$ 3 million was recognized and fully amortized and provisions for losses from investments were constituted in the same amount due to negative shareholders equity, the amount of R$ 509 thousand from the results of RPIs refining operations in the 2Q07 having been reversed.
In relation to the fuel distribution market, CADE declared that the terms of Provisional Remedy 087000.001507/2007 -80 referring to market concentration do not impede Petrobras and Ultrapar the purchasers of Grupo Ipirangas distribution businesses from maintaining an understanding with regard to drawing up a corporate governance framework designed to prevent any risk to the competition. CADE authorized the holding of meetings between Petrobras and Ultrapar in order to draw up such a proposal.
On May 16, 2007, CADE unanimously approved an agreement replacing those items in the Provisional Remedy that prevented Petrobras from taking part in strategic and commercial decisions related to the acquisition of Grupo Ipirangas distribution assets.
The Agreement to Preserve the Reversibility of the Transaction (APRO) allows Petrobras to choose a manager and negotiate the implantation of corporate governance procedures guaranteeing the preservation of the assets and the rights of the minority shareholders. The transaction schedule remains unaltered.
With the APRO, the management of the distribution assets acquired by Petrobras will be independent of the management of the assets acquired by Ultrapar.
The manager of Petrobras distribution assets was selected on the market and will manage the businesses until CADEs final decision on the transaction.
Also as a result of the APRO, Petrobras recorded a payment installment in the amount of R$ 313 million, relative to the distribution assets, as an advance under Non-Current Assets Long Term, while awaiting CADEs final decision on the transaction.