China State Grid Said to Near Control of $7 Billion Utility CPFL

Updated on
  • Deal would boost Chinese company’s stake to about 68%
  • State Grid agreed to acquire Camargo Correa’s share in July

State Grid Corp. of China reached a deal to gain control of Brazil’s CPFL Energia SA, after two major shareholders agreed to sell the Chinese company their stakes in the $7.3 billion utility, people with knowledge of the matter said.

Bonaire Participacoes and Banco do Brasil SA’s pension fund, known as Previ, have given informal approval to sell their combined 44.5 percent stake in CPFL for 25 reais a share, the people said, asking not to be named because the information isn’t public. The terms are the same as what the Chinese company offered when it agreed to buy Camargo Correa’s stake in the power distributor in July, and the deal will likely be announced in a few weeks, according to one of the people.

State Grid is currently engaged in due diligence for the Camargo Correa deal, a process that will take two more weeks, according to a third person with knowledge of the matter. After that, State Grid will send a letter with a formal offer for CPFL’s shareholders, who then have 30 days to respond.

The sale would increase State Grid’s stake in CPFL to 68 percent. The Chinese company has to extend the offer to all holders, which would also include subsidiary CPFL Renovaveis, according to another person. The full deal could reach 50 billion reais ($15.7 billion) including debt, the person said.

Hydropower Purchase

Previ’s press office said in an e-mail that the fund is analyzing the opportunity and focused on the best interest of its holders, who will be informed as soon as there is a decision. CPFL Energia, State Grid and Bonaire declined to comment.

Chinese firms are buying foreign utilities at the fastest pace in eight years, according to data compiled by Bloomberg. This month, Britain and Australia have refused to sign off on investments where state-owned Chinese companies were ready to provide funding.

Their interest also extends to Brazil. In January China Three Gorges Corp. became the nation’s second-largest private power generator after spending about $3.7 billion to win concessions to operate hydropower plants. State Grid agreed buy to Camargo Correa’s stake in CPFL in July, and made a bid to acquire Abengoa SA’s power-transmission lines in Brazil, people with knowledge of the matter said last month.

Bonaire -- a company which includes pension funds Petros, Cesp Foundation, Sistel and Sabesprev -- has a 15 percent stake in CPFL, while Previ has 29.4 percent. The possible takeover would be concluded by the end of the year, one of the people said.