Brazil's Cemig Bids For Portugal's EDP Stake
October 25 2011 - 7:16AM
Dow Jones News
Companhia Energetica de Minas Gerais (CIG, CMIG4.BR), or Cemig,
Brazil's third-biggest power utility, presented a proposal for
acquisition of the 21.35% stockholding interest in Portuguese
electric company Energias de Portugal (EDPFY), or EDP, the company
said late Monday in a statement.
"This proposal is in accordance with the development strategy
set out in Cemig's Long-Term Strategic Plan, which specifies the
aim of balanced growth in electricity generation, transmission and
distribution, through organic growth in the form of new projects
and also through mergers and acquisitions," Cemig said.
"EDP operates assets that have great strategic importance and in
which a partnership with Cemig could be of mutual interest to both
companies," it added.
Analysts expect a negative reaction for Cemig's shares.
"We expect a negative initial reaction despite the fact that
Cemig's management had suggested it would look into the deal. In
our view, the first reading is negative for Cemig, as we believe
the acquisition of a stake in EDP is not a good use of the
company's cash and balance sheet. We see negatively the possibility
of Cemig having a stake in a company with assets in Europe and the
U.S. At market prices, the bid would be worth some 4.5 billion
Brazilian reais ($2.56 billion)," Credit Suisse said in a research
report for its clients Tuesday.
Earlier this month, Centrais Eletricas Brasileiras (EBR), or
Eletrobras, as the Brazilian state-controlled utility is known,
also confirmed its proposal to acquire an EDP stake.
--By Rogerio Jelmayer, Dow Jones Newswires; 55-11-3544-7071;
rogerio.jelmayer@dowjones.com
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