By Brazil Stock Guide – Brazil’s securities regulator has postponed by 30 days an EMAE shareholder meeting that was due to vote on the power company’s full takeover by Sabesp (B3: SBSP3; NYSE: SBS), increasing scrutiny of the transaction’s valuation and potential conflicts of interest.
The extraordinary meeting had been scheduled for July 30. EMAE said a new date will be announced after additional information is made available to shareholders.
The ruling by the Comissão de Valores Mobiliários, or CVM — Brazil’s equivalent of the US Securities and Exchange Commission — represents at least a temporary victory for minority shareholders questioning both the valuation and the process used to determine the deal’s terms.
The transaction would give EMAE shareholders 1.3195 Sabesp shares for each EMAE share. The exchange ratio values EMAE at approximately R$32.15 per share, close to its recent market price but substantially below two recent benchmarks.
EMAE was privatized in 2024 at roughly R$70 per share. Sabesp subsequently paid R$61.85 per share when it acquired control of the company in 2026.
Regulator Questions Exchange Ratio
The CVM ordered EMAE to disclose the economic and financial assumptions supporting its conclusion that the exchange ratio is fair and balanced for both sides.
The regulator also requested information on any outstanding balances between Sabesp and EMAE, as well as a more detailed description of the nature and extent of Sabesp’s special interest in the transaction.
Those questions matter because Sabesp already controls EMAE, holding approximately 98% of its voting shares and 79.7% of its total capital. In practical terms, Sabesp is involved on both sides of the deal: it controls the company being absorbed and stands to benefit from consolidating full ownership.
The challenge was filed by minority shareholder Julia Otero, who owns approximately 6% of EMAE’s total capital and around 14% of its preferred shares. She argues that the documents provided to shareholders describe the procedural steps followed by the companies but fail to show clearly how the proposed exchange ratio was determined.
EMAE Defends Disclosure
EMAE said it had not yet received the full opinions issued by the CVM’s board members, president or technical staff. The company maintained, however, that the documents already disclosed contain all the information required for shareholders to cast an informed vote.
“The documents made available upon the call notice include all information required by applicable regulation and necessary for shareholders to vote on an informed basis,” EMAE said.
The company also said the negotiations strictly followed CVM Guideline Opinion No. 35, which sets governance procedures for transactions between controlling shareholders and controlled companies.
The CVM’s decision does not block the transaction or require the companies to adopt a new valuation. It does, however, force EMAE and Sabesp to provide a clearer explanation of how the financial terms offered to minority shareholders were calculated before the deal can move forward.
Leave a Reply