Iberdrola Said to Bid $3.4 Billion to Raise Neoenergia Stake

Iberdrola SA (IBE) offered about 6 billion reais ($3.42 billion) to raise its stake in Neoenergia SA, a Brazilian power company, to 75 percent from 39 percent, said a person close to the deal.

The Spanish electricity utility, based in Bilbao, expects the bid will help conclude talks with state-controlled Banco do Brasil SA (BBAS3) and Previ, the sellers, said the person, who asked not to be identified because the discussions are private.

The talks have been going on for more than a year. Brazilian President Dilma Rousseff is reviewing Iberdrola’s proposal and must approve it before the deal can move forward, the person said.

Iberdrola has announced more than $14 billion in acquisitions in the last five years, mostly for targets in North and South America, as it seeks to expand in faster growing markets and bring its expertise in wind energy to the Americas. The company, the world’s biggest investor in wind parks, already is larger than any U.S. power company by revenue.

Neoenergia, a Rio de Janeiro-based company that distributes electricity in the northeastern states of Bahia, Pernambuco and Rio Grande do Norte, had about 3.7 billion reais of cash and 5.2 billion reais in retained earnings as of Sept. 30, 2011, according to its latest statement. The bigger the stake Iberdrola has in Neoenergia, the better the Spanish company’s consolidated balance sheet will look, said the person.

Iberdrola declined to comment yesterday and officials weren’t immediately available to comment today. The shares rose 0.3 percent to 4.55 euros in Madrid at 10:31 a.m. local time.

Banco do Brasil declined to comment through its press office in Rio de Janeiro. Rousseff’s office in Brasilia declined to comment.

BNDES Stake

Banco do Brasil, a Brasilia-based bank controlled by the federal government, would sell its 11.99 percent stake in Neoenergia while its workers’ pension fund, Previ, would cut its stake to 25 percent from 49.01 percent, the same person familiar with the deal said.

Under the most recent proposal under discussion, Brazil’s national development bank, known as BNDES, may buy a stake of 15 percent to 20 percent in Neoenergia in a gradual process, diluting the other shareholders in the process, the person said. A previous proposal had the BNDES immediately buying a 15 percent stake in Neoenergia, according to the person.

BNDES declined to comment through its press office in Rio.

Previ needs to reduce its Neoenergia stake because local regulations don’t allow state company pension funds to own more than 25 percent of the capital of a single company. The government wants to retain a stake in Neoenergia because it considers the industry to be strategic, said the person.

To contact the reporter on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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