Petrobras eyes $79bn IPO as Brazil aims to be major oil exporter

Brazilian state-controlled oil company Petrobras yesterday increased the size of a planned share sale to as much as $79 billion (£50.5bn) in what could be the largest market offering ever.

The share offer will raise money for the firm's $224bn, five-year investment plan that is meant to turn Brazil, which in 2006 became self-sufficient in crude oil, into a major oil exporter.

The massive offer would dwarf the $22.1bn initial public offering (IPO) by Agricultural Bank of China earlier this year, as well as the $36.8bn share sale by Japanese telecommunications company NTT in 1987.

State-controlled Petrobras said it could exercise a "greenshoe" option to sell an additional 940 million shares to meet extraordinary demand, compared with an original option to sell 564 million shares, as the company raises funds for the world's biggest oil exploration programme.

That could be a sign that investors are overcoming concerns about a $43bn oil-for-shares swap with the government that is included in the operation - an arrangement analysts called disadvantageous to Petrobras's private shareholders.

Marcio Macedo, of Humaita Investimentos in Sao Paulo, said: "It's a positive sign. It could mean that there is a big buyer out there like a sovereign wealth fund that has expressed interest."

The record size of the issue will create a windfall for underwriters, which will be led by Brazil's Banco Bradesco in coordination with Bank of America Merrill Lynch, Citigroup, Itau Unibanco, Morgan Stanley, and Banco Santander Brasil.

The offer will also be co-managed by Brazilian investment bank BTG Pactual and state-owned Banco do Brasil.

Completion of the record sale is expected to pave the way for stock offers by other companies that did not want to compete with Petrobras, including Spanish energy firm Repsol's planned share offer on Brazilian capital markets.

Access to huge crude reserves buried deep under the ocean floor in a region known as the subsalt and domination of Brazil's rapidly growing fuel markets have made the company's stock a top emerging market pick in recent years.

But uncertainty over the transaction, which was delayed for two months, has weighed heavily on the company's shares.

Petrobras will price the offer on 23 September, less than two weeks before Brazilians vote in a presidential election that polls say will probably favour Dilma Rousseff, president Luiz Inacio Lula da Silva's successor. The transaction is expected to increase the state's percentage of the company's total capital

l We have been asked to point out that a photograph accompanying an article yesterday about the acquisition of KemFine in Grangemouth, showed the Ineos plant which is not affected by the announcement.