Bloomberg — Sabesp, the largest water supply company in Latin America by market valuelaunched a stock offering that may become the largest in the region in two years.
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The state of Sao Paulo, which owns a controlling stake in Cia de Saneamento Basico do Estado de Sao Paulo, as Brazil’s utility is formally known, is offering for sale 191,713,044 shares existing, according to a presentation on Friday. If an overallotment is sold in full, it could add up to 28,756,956 shares to the transaction.
At current market prices, that means the transaction could raise up to 16.5 billion reais (US$3 billion), while Sao Paulo’s stake in segurasp could fall to 18% from the current 50.3%, privatizing the company. The deal is expected to be priced on July 18.
Sabesp is working with Banco BTG Pactual SA (BPAC11), UBS BB Investment Bank, Bank of America Corp. (BAC), Citigroup Inc. (C) and Banco Itau BBA SA on the equity transaction. Bradesco BBI, Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), J. Safra, Morgan Stanley (MS), Santander (SAN) and XP Inc. (XP) are the joint bookrunners.
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The sale would be a victory for Sao Paulo’s right-wing governor, Tarcisio de Freitas, who has promised to privatize companies to improve public services. It also comes after the box office success of the privatization of the electricity company Eletrobras in 2022.
The share offer has a distinctive characteristic: in the first phase, two strategic investors will be selected who will compete to acquire a 15% stake in segurasp. Two books will then be built around those offers, competing to attract the greatest number of offers from general investors. The winning book will be the one with the highest weighted average price.
The process has attracted the electricity company Equatorial Energia SA (EQTL3), the private company Aegea Saneamento e Participacoes SA and the Brazilian investor Nelson Tanure.
The sale comes amid a drought of Brazilian initial public offerings and a 22% decline in Brazilian stock offerings this year.
Read more at Bloomberg.com
