China’s State Grid International Development Ltd. bought seven power transmission lines in Brazil for 751.7 million euros ($936 million) to expand in Latin America’s biggest economy.
An agreement was signed with Spain’s ACS Actividades de Construccion & Servicios SA on May 26, according to a statement posted yesterday on the website of the unit of State Grid Corp. of China. ACS units Area Industrial, Cobra, Cymi and CME will sell the lines for an enterprise value, comprising 423.4 million euros in equity and 328.3 million euros in debt, the Madrid-based company said in a statement May 28.
ACS is selling assets to pay debt as orders waned for Spanish builders following government spending cuts on infrastructure. The diminishing fortunes of debt-laden European companies are providing State Grid an opportunity to secure targets at discounted valuations. State Grid in January bought 25 percent of Portugal’s national power grid company Redes Energéticas Nacionais.
“You don’t have to pay a premium when someone is eager to sell something,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. “The timing certainly works for State Grid. It can cut cost and strike scale advantage and may also gain technology knowhow.”
The transaction is pending regulatory approval, ACS said. Most of the power lines are operational, State Grid said in its statement. The lines, located in 10 states, have a total length of 2,792 kilometers (1,735 miles), it said.
The acquisition will “further improve the company’s market share in Brazil’s power transmission industry, strengthen the scale advantage and improve influence and competitiveness in global markets,” State Grid said in the statement.