AES Tietê rejects Eneva’s US$1.5 billion merger proposal

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Brazil’s AES Tietê, a unit of U.S.-based AES Corp, has rejected Eneva’s US$1.5 billion merger proposal. After 11 meetings of analysis, the board of directors decided unanimously to decline the offer that was first unveiled on March 1, BNamericas says.

During a conference call on Monday morning, AES Tietê’s Chief Executive Officer àtalo Freitas said the proposal undervalued his firm and was not attractive for shareholders. He also said Eneva had dragged its feet in terms of sharing all the documents related to the offer and accused it of having been evasive when asked about its financial capacity.   

“The board does not see a strategic fit between the companies. It would bring additional risks to our shareholders. AES would add gas and coal-fired thermopower to its matrix, which is currently 100% composed by renewables, smudging our portfolio,” Freitas said. “The deal would bring several benefits to Eneva, but not for AES, creating imbalances.”

Eneva’s chief motivation for the merger was the complementarity of the business portfolios of the two firms, besides their geographically diversified footprint with assets in all Brazilian regions. The combined company would have become the country’s fourth largest power generator with projected thermo, wind, hydro and solar capacity of 6.4 GW by 2024.   

AES Tiete owns 10 hydroelectric facilities with a total generating capacity of more than 2,418 MW.

Shortly after the offer was announced, AES Tietê questioned local investment bank BTG Pactual about a potential conflict of interest as the bank had coordinated a share issue last year and had access to confidential information on the AES subsidiary. BTG Pactual owns a stake in Eneva and some of its partners work as advisers to the power firm.    

As part of the reasons to reject the offer, AES Tietê said the moment was not adequate for merger talks since both companies could face greater difficulties in obtaining financing. “If the proposal was already unattractive before the [COVID-19] crisis, it becomes even less attractive at the current moment, when there are no certainties about financing and there is a lack of probability of other potential buyers competing with Eneva’s offer,” said Freitas.   

AES Tietê’s Chief Financial Officer Clarissa Della Nina did however tell Reuters that the firm could be willing to consider an improved offer.   

Eneva said in a statement that it is analyzing the reasons put forward by AES Tietê to motivate the rejection of its proposal.

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