CPFL completes negotiation for Chinese control

State Grid concluded this week the acquisition of a 54.64% stake in CPFL Energia with the purchase of shares owned by Camargo Corrêa and the pension funds Previ, Fundação Cesp, Sabesprev, Sistel and Petros. The deal may exceed R$ 25 billion (US$ 7.8 billion). The total amount still depends on the realization of the public offering for the acquisition of shares that are with minority shareholders. With the sale to the Chinese, the shareholding composition was as follows: 54.64% with State Grid; 9.7% with Previ and 3.8% with Energia SP FIA. There are still 31.9% of shares that are outstanding in the stock exchange.

The Brazilian group informed in a note that “the acquisition of CPFL Energia′s shareholding control by State Grid strengthens the CPFL Group′s growth strategy and the leading role in the Brazilian electricity sector”. CPFL reported that State Grid is the second largest company in the world, according to Fortune magazine. The Brazilian company stressed in note that the new parent company serves more than 1.1 billion customers in China, which covers about 88% of China′s territory. The company′s revenue in 2015 was US$ 320 billion. Assets total US$ 480 billion. The Chinese has operations in countries such as Italy, Australia, Portugal, the Philippines, Hong Kong and Brazil.

The president of CPFL Energia, Andre Dorf, said in a statement that the transaction reinforces the holding’s leadership position. “Having a shareholder of the size of State Grid brings us the confidence that CPFL Energia will continue its growth trajectory, reinforcing the leading position in the main segments of the Brazilian electricity sector. We have a business platform prepared to take advantage of new market opportunities, and State Grid support will be critical”, he said.

In a note, CPFL Energia reported that, as previously announced, “State Grid will register the application for the Share Acquisition Public Offer (OPA) for the purchase of the remaining equity interests of CPFL Energia and will hold a separate tender offer for the acquisition of remaining shares of CPFL Renováveis, after finalization of the records provided in the Brazilian legislation. The former CPFL Energia shareholders′ agreement was terminated with the purchase of the Group by State Grid”.

Purchase History

In September, State Grid had signed an agreement for the purchase of 23% of CPFL Energia, referring to the participation of Camargo Côrrea. The price paid per share was R$ 25.00 (US$ 7.8), but the value can still be adjusted until the definitive closing of the purchase. Under the agreement, the other shareholders of the controlling block could exercise preemptive rights in the acquisition or could still decide to sell the stakes in CPFL Energia to the Chinese State Grid for the same amount of the share.

At the time, the statement to the market said that the deal still involved the 51.6% interest of the Brazilian company in the subsidiary CPFL Renováveis. One more term in the agreement was that, if the State Grid reached a sufficient number of shares issued by the Brazilian electricity group, it would, under the terms of the applicable legislation, promote a Share Acquisition Public Offer (“OPA”) for the outstanding shares of CPFL Energia. If China buys the shares of all shareholders in the controlling block and minority shareholders, the deal could exceed R$ 25 billion (U$ 7.8 billion).

Profile

For 104 years in the energy market, CPFL Energia operates in the distribution, generation, commercialization, services and telecommunications segments. The company has 14.3% of the distribution market, with a 14.3% stake, serving more than 9.1 million customers. The concession area covers 679 cities in São Paulo, Rio Grande do Sul, Minas Gerais and Paraná. In marketing, the company has 14.1% of the market in the sale to final consumers among the marketers.

In generation, it is the third largest private agent. The company is listed on the New Market of BM&FBovespa and ADR Level III on the NYSE, as well as participating in the Dow Jones Sustainability Emerging Markets Index and Morgan Stanley Capital International Global Sustainability Index (MSCI). The company also has shares in BM&FBovespa′s Corporate Sustainability Index (ISE) portfolio for the 12th consecutive year.

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