(Bloomberg) -- A seven-week tug of war over Petrobras’s dividends wound up with the company delivering a 22-billion-reais ($4.3 billion) payout to investors.
Brazil’s federal government, which controls the company, proposed to pay half of available extraordinary dividends at a Thursday shareholders meeting, backtracking from a previous decision to withhold the payment.
Petrobras’ common shares rose as much as 1.5% to a session high after the announcement, before trimming some gains. Shares were at 43.78 reais in Sao Paulo before trading was halted due to pending news.
The move, which was approved by shareholders, settles a dispute that had roiled markets and intensified a power struggle between Chief Executive Officer Jean Paul Prates and members of the Lula administration. The result is a victory for both Prates and Finance Ministry Fernando Haddad, who encouraged President Luiz Inacio Lula da Silva to accept the dividends as a way to slash a budget deficit.
On April 19 the majority of Petroleo Brasileiro SA’s board endorsed the 50% payout ahead of the shareholders meeting. The government justified the reversal from a decision not to pay in March by saying the payment wouldn’t undermine the company’s finances. Petrobras may review the possibility of paying the rest of the extraordinary dividend over the course of the year.
As the company’s largest stockholder, with 50.3% of voting shares, the Brazilian government will be the single biggest beneficiary of the payout.
In March, government-appointed board members shot down a proposal from management to pay 50% of the dividends while putting the rest into a reserve fund. Prates abstained from that vote in a move that put him in the crosshairs of politicians in Brasilia. The episode fueled speculation that Prates could lose his job and caused wild swings in Petrobras’ share price.
Read More: Petrobras CEO to Remain in Charge for Now as Dispute Cools
The government wants to make sure that Petrobras has enough capital to make Latin America’s largest oil producer a motor for economic growth and job creation. Prates, a former senator, has been struggling to navigate competing expectations from profit-oriented investors and Lula.
--With assistance from Leda Alvim.
(Updates with shares, additional details and background starting in third paragraph)
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