Elliott Continues Push for EDP to Sell Brazil Stake

(Bloomberg) -- Elliott Management Corp. plans to continue pushing EDP-Energias de Portugal SA to sell its Brazilian assets, contending that’s the best way for the utility to unlock value for shareholders, according to people familiar with the matter.

EDP announced last week that it plans to dispose of 2 billion euros ($2.3 billion) in non-core assets through 2022, mainly in Spain and Portugal. Elliott, which owns 2.9 percent of EDP, believes that strategy ignores the opportunity that would be created by selling its 51 percent EDP-Energias do Brasil SA stake, said the people, who asked not to be identified because the deliberations are private.

In Elliott’s view, EDP’s plan also lacks the urgency needed to address the company’s underperformance, the people said. The New York-based hedge fund, run by billionaire Paul Singer, argued last month in a presentation that the Brazil assets could fetch 2.3 billion euros in a sale.

Even though EDP hasn’t put the EDP Brasil stake on the auction block, Elliott was heartened by Chief Executive Officer Antonio Mexia saying during a conference call last week that he was open to exploring opportunities to enhance the value of those assets, the people said.

“Brazil is consistent with our strategy but once again, we consider anything that enhances value for that asset” very interesting, Mexia said.

Representatives for Elliott and EDP declined to comment.

Elliott’s push for the utility to sell its Brazil assets is taking place against the backdrop of China Three Gorges Corp.’s 9.1 billion-euro bid for EDP, which remains subject to regulatory approval. Mexia said in an interview in January that he believed EDP’s strategic partnership in Brazil with the Chinese power giant would continue even if the takeover falls through.

Elliott has argued that the China Three Gorges offer undervalues EDP. Instead, it argued that the company should sell its stake in EDP Brasil, a 49 percent stake in its Iberian electricity distribution business and its legacy Iberian thermal assets. Elliott wants EDP to use to the proceeds to pay down debt, reinvest in its renewable portfolio and return value to investors through share buybacks.

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