March 2, 2020 / 3:38 PM / a month ago

Brazil energy company Eneva proposes $1.5 billion merger with rival AES Tiete

SAO PAULO (Reuters) - Brazilian energy company AES Tiete (TIET11.SA) said on Monday it had received a merger proposal from Eneva (ENEV3.SA), a proposed 7 billion real ($1.5 billion) deal that would create a giant in power generation.

Shares in AES Tiete were up 18.8% in mid-morning trading in Sao Paulo at 18 reais. Shares in Eneva rose as much as 8% at the open and were up 4.3% at 44.58 reais.

Eneva said in its proposal that it is willing to pay a 13.3% premium to buy out AES Tiete shareholders, for a mix of 2.75 billion reais ($611.29 million) in cash, and some 3.9 billion reais worth of Eneva shares, equivalent to a 22.6% stake.

“In the end, the operation’s merit is partly due to the consolidation of a portfolio that combines hydroelectric assets, with thermoelectric, eolic and solar assets,” Eneva president Pedro Zinner told Reuters in an interview.

The combined companies would have 6.4 gigawatts in installed capacity through 2024 and would be Brazil’s fourth-largest power generator, behind state-controlled Centrais Eletricas Brasileiras, known as Eletrobras, and private cos Engie Brasil, a subsidiary of France’s Engie SA (ENGIE.PA), and CTG Brasil, a subsidiary of China’s Three Gorges Corp.

Eneva mostly operates gas thermoelectric generators, while AES Tiete has a large portfolio of hydroelectric plants and more recently has placed bets on wind and solar energy.

AES Tiete said in a securities filing disclosing the proposal that it had yet to decide whether it would accept it. The merger, a hostile bid valid for 60 days, would also undergo regulatory scrutiny.

Among Eneva’s shareholders are Latin America’s largest investment bank, BTG Pactual (BPAC11.SA), and Cambuhy Investimentos, owned by billionaire banking clan Moreira Salles.

Reporting by Luciano Costa; Editing by Jonathan Oatis and Nick Macfie

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