By Brazil Stock Guide – Minas Gerais expects to identify the winning investor for Copasa on June 2, when the bookbuilding process is scheduled to close and the final share price is set, according to official documents filed on May 20.
The state is selling its stake in Companhia de Saneamento de Minas Gerais – Copasa (CSMG3) through a secondary share offering that could raise as much as R$10.04 billion. Settlement is scheduled for June 8, making the transaction one of the largest sanitation privatization processes currently moving through Brazil’s capital markets.
The base offering includes 171.1 million common shares, equivalent to 45.00% of Copasa’s capital. If additional shares are fully placed, the sale could reach 190.2 million shares, or 50.03% of the company — effectively the full common-share stake currently held by the Minas Gerais government.
Based on Copasa’s R$52.77 closing price on May 19, the base offering would total R$9.03 billion. With the additional shares, the gross amount could rise to R$10.04 billion, according to the preliminary prospectus.
June 2 decision
The timetable makes June 2 the key date for the transaction. That is when the bookbuilding process is expected to end, the share price is expected to be fixed and the selling shareholder is expected to approve the price. The launch announcement and final prospectus are scheduled for June 3, with trading of the offered shares expected to begin on June 5 and settlement on June 8.
The offering is being coordinated by BTG Pactual, as lead coordinator, alongside Itaú BBA, Bank of America, Citi and UBS BB. The deal also includes international placement efforts through BTG Pactual US Capital, Itau BBA Securities, BofA Securities, Citigroup Global Markets and UBS Securities.
A large sanitation prize
Copasa is one of Brazil’s most relevant remaining sanitation assets. As of March 31, the company and its subsidiaries held concessions in 75% of Minas Gerais’ municipalities, serving about 12 million people with water supply. Around 8.8 million of those customers also received sewage services.
In the market, Aegea and Sabesp had been cited as possible contenders. Local press reported that Equatorial is still evaluating whether to participate after Sabesp, its expected partner, dropped out of the process, according to people familiar with the matter. Aegea had shown interest in Copasa.
Offer conditions
The offering will be open to retail and professional investors and may include a selected reference investor. Partial distribution is allowed, provided at least 114.1 million shares are placed. The offer may be canceled if demand does not reach that threshold or if the final price does not meet the minimum price approved by the Minas Gerais government.
Debt and tariff issues remain further down the agenda. The prospectus does not estimate any tariff increase or say Copasa could be used as a debt vehicle. It does, however, list financing availability, leverage, investment needs and capital structure among relevant risks for the company and the offering.
For Minas Gerais, the process is now a market test. For Brazil’s sanitation sector, it is a rare opportunity: a large regulated utility, a clear timetable, global banks in the syndicate and a potential transaction of more than R$10 billion.
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