Petrobras Seeks IPO Regulatory Nod

Petrobras looking to slash costs, sell assets; fuel unit IPO would depend on market conditions.

The board of Petróleo Brasileiro SA has approved a plan to seek regulatory permission for an initial public offering of the state-controlled oil producer's fuel distribution unit, weeks after hiring the banks that will handle the deal.

The decision to pursue the IPO comes as the company known as Petrobras increasingly relies on cost reductions, asset sales and decreasing capital spending as a way to keep debt sustainable in the face of a corruption scandal.

The BR Distribuidora fuel distribution unit was recently valued at around $10 billion by UBS Securities analysts, with a banking source saying previously that the offering could be for at least a quarter of that amount.

In a securities filing distributed early on Friday, Petrobras said the listing of BR Distribuidora would depend on global and domestic market conditions. Petrobras will pursue all the necessary authorizations from securities industry watchdog CVM as well as other regulatory agencies to carry out the transaction, the filing said.

Petrobras did not specify terms of the transaction or a potential timetable in the filing. But the timing of the announcement, which coincided with the release of Petrobras' second-quarter results, suggests the company could price the offering as early as October.

Sources told Reuters last month that Petrobras had hired the investment-banking units of Citigroup Inc, Banco Bradesco SA (BBDO), Itaú Unibanco Holding SA, Banco do Brasil SA, Grupo BTG Pactual SA and Bank of America Corp to manage the IPO.

BR Distribuidora controls Brazil's largest gasoline, ethanol and diesel station network.

The same source said at the time that the plan could help Petrobras fetch around 10 billion reais ($2.8 billion) from the offering, making it the nation's biggest IPO since BB Seguridade Participações SA's listing in April 2013.

Proceeds would go to Petrobras and not to BR Distribuidora, in a transaction usually known as a secondary offering.

Reporting by Guillermo Parra-Bernal