BAK - Braskem: A Rising Odds For ADNOC Deal Though Declining Risk-Reward (Rating Downgrade)

2024-04-05 04:17:29 ET

Summary

• Braskem's potential acquisition by ADNOC is still in the spotlight, with due diligence ongoing. The political environment in Brazil remains supportive of the deal.
• BAK’s liquidity is more than enough to cover its obligations in the coming years, mitigating the financial risk.
• The uncertainties around tag-along rights are diminishing. In February 2024, Petrobras exercised its rights when it sold its 18.8% stake in UEG Auracaria.
• With the expected takeover price by ADNOC in the range of $14-$15/share and the present stock price of $10.3, the risk-reward is not skewed in our favor. I give BAK a hold rating.

Note: I previously covered Braskem ( BAK ). In my previous take, I highlighted the potential of the ADNOC acquisition, bringing a 100% upside potential. Since my note, BAK’s shares have moved up 51%. In today's article, I will discuss the later updates on the deal and discusses BAK’s rating....

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