July 24, 2019 / 10:48 AM / 4 months ago

UPDATE 2-Petrobras Distribuidora shares jump on privatization

(Recasts throughout with additional context, updates share performance)

By Tatiana Bautzer and Carolina Mandl

SAO PAULO, July 24 (Reuters) - Shares of Petrobras Distribuidora SA, Brazil's biggest fuel distributor, jumped more than 6% on Wednesday after its state-run parent company effectively privatized the firm.

In a share offering priced on Tuesday evening, Brazil's state oil company, Petroleo Brasileiro SA, known as Petrobras, received strong demand for a 30% stake in the fuel distributor, priced at 24.50 reais per share.

The oil company said in a securities filing that it raised 8.56 billion reais ($2.28 billion) from the sale, an amount that could rise to 9.6 billion reais if it sells additional shares.

Three sources with knowledge of the matter said there is enough demand for the full sale of the supplemental allotment. Demand was 4.5 times the offering size, one of the sources added, asking for anonymity because the information was not public.

In the lead-up to the sale, analysts pointed to potential upside, as a privatized Petrobras Distribuidora would be free of many of the legal obligations of state-run companies, which could help to reduce costs and improve efficiency.

In a note to clients, Sao Paulo-based XP Investimentos said investors' attention will turn now to how the gas station chain streamlines operations. XP analysts noted that the firm has significantly weaker profit margins than its two main rivals: Ipiranga, controlled by Ultrapar Participacoes SA, and Raizen, a joint venture of Royal Dutch Shell PLC and Brazil's Cosan SA.

New management at Petrobras is aggressively reducing its stake in downstream and midstream operations to sharpen its focus on offshore oil exploration and production.

Its fuel unit operates Brazil's largest gas station chain, with over 8,000 outlets operating under its brand name, BR Distribuidora.

$1 = 3.75 reais Reporting by Tatiana Bautzer and Carolina Mandl Additional reporting by Ana Mano Writing by Gram Slattery Editing by Brad Haynes and Keith Weir

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