Billion-Dollar Brazil Utility Fight Heats Up With New Bids

(Bloomberg) -- The bidding war for Brazil’s prized Eletropaulo SA utility is heating up with two European power giants looking to best each other’s bids.

Italy’s Enel SpA said Thursday it would increase a promised capital injection to 1.5 billion Brazilian reais ($443 million) to sweeten its 28 reais-a-share offer for the AES Corp. unit. The move came hours after the Brazilian unit of Spain’s Iberdrola SA was said to have the financing to boost its per-share bid to 30 reais from 25.51 reais. It had previously pledged 1.5 billion reais in capital.

“For now, Iberdrola is definitely the one winning the game,” said Alexandre Montes, an equity analyst at financial research firm Lopes Filho & Associados Consultores de Investimentos. “It’s not possible to neglect the upside of an offer of around 30 reais a share. Iberdrola has more synergies with Eletropaulo and is willing a higher premium for it.”

Billion-Dollar Brazil Utility Fight Heats Up With New Bids

Eletropaulo has been a topic of takeover speculation for several years. The competition heated up this month, when Energisa SA offered 19.38 reais a share, a bid that was unanimously rejected by the Eletropaulo board. Whoever ends up buying Eletropaulo will gain an additional 18 million customers in Sao Paulo state, the most populous in Brazil.

Enel, which already has about 10 million customers in Brazil, will add 500 million reais to a previous offer to inject 1 billion reais in capital into Eletropaulo, according to a spokeswoman Friday.

The Iberdrola unit, Neoenergia, plans to discuss increasing its bid at a meeting Friday, according to the people familiar with the discussions who asked not to be identified because the information isn’t public. It could spend even more than 30 reais a share on the offer, depending on how much cash it wants to use, the people said.

Brazilian securities regulator CVM also stepped into the bidding war on Thursday, ordering Enel and Energisa to carry out their offers for Eletropaulo jointly on May 18, according to a letter posted Thursday by Eletropaulo.

Spanish newspaper Expansion reported earlier Thursday that Iberdrola was considering raising its bid. Shares of Eletropaulo rose 0.4 percent to 28.95 reais at 5:07 p.m. in Sao Paulo. Earlier, they touched 29.93 reais, the highest intraday level since January 2017.

Those who have dropped out of bidding for the company include CPFL Energia SA, a Brazilian power utility owned by State Grid Corp. of China, according to a person familiar.

A deal would further Iberdrola’s expansion into markets outside Spain and comes as the company is working to boost its earnings before interest, taxes, depreciation and amortization by more than 20 percent this year.

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