Iberdrola And Enel Take Their Fight To Be The Biggest European Energy Firm To Latin America

IberdrolaMoncloa considers decree law to implement tax on energy cos

Neoenergia, Iberdrola’s flagship in Brazil, has launched a 1.5 billion euros takeover bid for Eletropaulo Metropolitana Electricida de São Paulo. A few hours later, Italian energy firm Enel also lodged bid, improving the price offered by Iberdrola by 9.7% at 28 Brazilian reals per share. In a note sent to the São Paulo stockmarket, Enel said its proposal will be available until May 18. However the fight has intensified: Enel’s 28 euros offer now also includes a capital for, at least, 1.5 billion Brazilian reals (355 million euros). So the Italian company’s total offer is 1.47 billion euros.

Iberdrola has also decided to improve its bid to 29,4 Brazilian reals per share. This is 5% more than Enel’s offer and 15% more than the Spanish firm’s original bid. So in total, Ibedrola’s new offer, implemented by Brasil Neoenergia, would be over 1.6 billion euros.

For Bankinter analysts, Iberdrola’s move in Brazil is positive, given that Neonergia and Eletropaulo are geographically complementary: there is no overalap and they are in adjacent regions.

“From an operational point of view, the transaction means bringing two big Brazilian companies together. As far as the price goes, a bid very much more than 30 reals could raise doubts over the value creation for the shareholder,” Bankinter says.

Iberdrola’s market capitalisation is over 39 billion euros. So this operation in Brazil represents 4% of its value.

Renta4 agrees that the transaction is positive “in the sense that it shows Iberdrola has the financial strength to respond to moves from its competitors.” But the analysts believe that getting into a bidding war could lead to some pressure on the share price in the short-term, until there is a solution to the operation.

“We reiterate an overweight stance for long-term investors, with a target price of 7,5 euros/share.”

So the two groups have now taken their fight to become the biggest global European electricity company to Latin America.

Meanwhile, Iberdrola has begun to work on a road map to tackle the issue of who will succeed current chairman Ignacio Sánchez Galán in the medium-term, foreseeably between 2022 and 2023. The company’s idea is to come up with a well defined scheme in terms of how the handover takes place, the timetable and the candidate. Galan’s mandate as CEO ends in 2019 and is expected to be renewed for another four years at next year’s AGM. Galan became Iberdrola CEO in 2001 and was appointed executive chairman in 2006.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.