Braskem - ADNOC deal falls through, but there's more to this story

Well, it's been a volatile morning for BAK holders. At 7:40 AM EST the company put out the following press release informing the market that ADNOC had informed Novonor it was no longer interested in continuing talks on acquiring their stake.

“Dear Sirs,

We refer to the negotiations with ADNOC International Limited - Sole Proprietorship L.L.C. ("ADNOC") on a potential transaction involving the transfer of shares held by NSP Investimentos S.A. - Em Recuperação Judicial ("NSP"), controlled by Novonor S.A. - Em Recuperação Judicial ("Novonor"), issued by Braskem S.A. ("Braskem" or "Company") ("Potential Transaction").

We have been informed by Adnoc that they have no interest in continuing the process of analysis and negotiations with Novonor on the Potential Transaction. Novonor remains fully engaged in the process, in line with its commitment to its related parties.

Being that what is required of us at this time, we endorse this correspondence.

Sincerely,

NOVONOR S.A.”

Shares initially plunged nearly 30% in premarket, and then recovered more than half the losses. Exactly why the deal fell apart is unclear. Analysts from banks and investment groups focused on the transaction are also unsure what happened. There is some speculation, however, that it comes down to price. Novonor is asking for a price approximately 50% higher (around $22/share) than ADNOC offered ($15/share). Another source, the Brazilian financial publication Valor, suggested that the deal fell apart due to ADNOC's apprehensions regarding the political spectacle surrounding the company. That's simply speculation, however. Considering CPI is ending soon, to me, it makes little sense that ADNOC wouldn't simply wait for the conclusion of the event to see if Braskem would have new liabilities.