Privatization of Eletrobras in Brazil attracts new investors, including funds from Singapore and Canada

A person stands next to the logo of Brazilian electricity company Eletrobras in Rio de Janeiro, Brazil January 3, 2019. REUTERS/Pilar Olivares

Join now for FREE unlimited access to Reuters.com

Register

SAO PAULO/RIO DE JANEIRO, June 8 (Reuters) – Brazil’s state-owned power utility Eletrobras (ELET6.SA) is set to raise around $6 billion in a stock offering with infrastructure funds from Canada and Singapore among the bidders, according to two people with knowledge of the matter.

The Canada Pension Plan Investment Board (CPPIB) and Singapore’s GIC, rarely seen in follow-on offerings, are set to become relevant shareholders in Centrais Eletricas Brasileiras SA, under the official name of Eletrobras, after the offer, the sources said.

The share offering that will lead to the privatization of Eletrobras, Latin America’s largest utility, with state ownership shrinking to around 45%, is expected to be set on Thursday. It will be one of the largest equity offerings in the world this year, behind the $10.7 billion IPO of South Korea’s LG Energy Solution Ltd and nearly $6.08 billion raised by the IPO of the Dubai Electricity and Water Authority.

Join now for FREE unlimited access to Reuters.com

Register

GIC will be a mainstay of the equity offering, alongside traditional equity investors such as Brazilian asset managers SPX Capital and Truxt, the sources said.

GIC and CPPIB are expected to partner with asset manager 3G Radar, now Eletrobras’ largest private shareholder with an 11% stake, to design a post-privatization strategy, the sources said.

GIC, CPPIB and 3G Radar’s associated company, 3G Capital, are investors who generally acquire control of companies. One of the sources said that 3G Radar, which has been a shareholder in Eletrobras for more than five years, was sounding out executives to join Eletrobras after privatization.

Part of 3G Radar’s 1.5 billion reais ($306 million) in assets under management comes from partners of 3G Capital, the majority shareholders of brewer AB Inbev (ABI.BR) and food manufacturer Kraft Heinz (KHC.O). The leader of 3G Capital, Alex Behring, sits on the board of directors of 3G Radar.

CPPIB declined to comment on “market speculation.”

3G Radar, 3G Capital and GIC did not respond to requests for comment.

Other major Brazilian investors considered the offer but decided against it, including holding company Itausa SA (ITSA4.SA) and industrial conglomerate Votorantim SA, according to one of the sources. Votorantim declined to comment on the “speculations”. Itausa did not immediately respond to requests for comment.

Investors have had to weigh threats to roll back the privatization of Eletrobras from advisers to Brazil’s main presidential candidate in the October elections, the leftist former president Luiz Inacio Lula da Silva. Read more

As investors discuss Eletrobras’ future strategy, they must consider the governance framework of privatization. The new bylaws include a poison pill mandating an expensive takeover bid if any investor or group of investors owns more than 50% of the voting capital.

There is, however, a broad consensus among the largest investors and analysts that the unification of the structures of the largest subsidiaries of Eletrobras would lead to almost immediate and relevant cost savings, but other details of the future strategy are not known. not yet defined.

Demand appears strong for Thursday’s stock offering, which will be handled by investment banking units of BTG Pactual, Bank of America, Goldman Sachs, Itau Unibanco Holding SA, XP Investimentos, Banco Bradesco, Caixa Economica Federal , Citigroup, Credit Suisse, JPMorgan, Morgan Stanley and Safra.

Two other people with knowledge of the matter said demand for the offer was strong and had already reached 50 billion reais ($10.3 billion).

One of the sources said demand from retail investors using money from their government-run seed funds, known as FGTS, is also higher than estimated. Retail investors must signal their interest until Wednesday and institutional investors by Thursday.

($1 = 4.9044 reais)

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Tatiana Bautzer; Editing by Christian Plumb and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

About Ellie Cohn

Check Also

Small businesses send recession warning signal

Placeholder while loading article actions The Federal Reserve is raising interest rates aggressively to fight …