Sanitation company has already hired Bradesco BBI and Morgan Stanley to find investors
Deals will help Iguá leave behind turnaround process and consolidate itself as one of the largest players in the sector — Foto: Divulgação
Sanitation company Iguá has hired Bradesco BBI and Morgan Stanley to find a new partner. According to three market sources, the mandate for private placement is already in place, aiming for a primary transaction of R$2.5 billion to R$3 billion ($500 million), in a minority position that could reach a shared control.
Banks and the company have started conversations with at least four potential investors: the U.S.-based fund Ontario Teachers Pension Plan (OTPP), Canada’s CDPQ, and the Brazilian groups Votorantim and Equatorial, sources told Pipeline, Valor’s business website.
Iguá’s shareholders are the Canadians CPPIB and Aimco, and the management company IG4, investors with cash to finance the company. BNDESPar, the Brazilian Development Bank’s equity arm, is also a shareholder. The participation of the current partners in the capitalization is not ruled out, sources say. “They are looking for this capital from a new investor as a minimum amount, but they say they can follow up,” said a source that had access to information on the capitalization process
The company set the beginning of November as the deadline for non-binding offers, sources say.
The final amount will depend on the type of opportunity Iguá finds. The goal of the capitalization is to prepare the company to compete in new concessions and potential privatizations, such as Corsan, Copasa, and Sabesp — an expectation of the sector considering the elected governments in the respective states. But the company’s interest in buying competitor BRK Ambiental is no secret.
BRK is controlled by Brookfield and FI-FGTS, the investment arm of the Workers’ Severance Fund, and had been giving preference to an IPO. There have already been two attempts to launch the offer, but with no progress given the market conditions. Brookfield seems to have changed its mind about the outcome for the asset — the fund would have authorized Itaú BBA to sound out potential buyers, according to two sources, but one of them says there is no formal mandate yet.
Some of Iguá’s shareholders prefer not to have the complexity of the FI-FGTS on the board, which means that a deal will only happen in a full transaction. Another operator that may place a bid for BRK in case the shareholders decide to follow through with a formal process is Aegea, which has Equipav, GIC, and Itaúsa as shareholders, as well as potential interest from infrastructure funds. The current management of the federal bank is sympathetic to the idea, but next year, everything can change — which also explains Iguá’s timing.
The private placement is one of three mandates Iguá is putting in place, according to market sources. The company would also have already hired BTG Pactual, Bradesco BBI, and Itaú BBA to issue R$5 billion in infrastructure debentures, a debt that will pay off part of the bridge that the concessionaire took to take a piece of the Cedae operation, in Rio de Janeiro, and lengthen its liabilities.
On the selling side, Itaú BBA has sought interested parties in 11 small concessions from Iguá, which wants to focus on larger operations. The assets for sale are concessions in cities with less than 500,000 inhabitants, in Santa Catarina, Mato Grosso, and São Paulo, and the bank has offered potentially interested buyers the closed package — estimated between R$500 million and R$600 million, sources told Pipeline.
On the three fronts, the company can raise between R$8 billion and R$9 billion in total for its market consolidation strategy. Iguá declined to comment.
The deals will help Iguá leave behind the legacy of a company in turnaround to consolidate itself as one of the largest in the sector. When IG4 bought CAB Ambiental from Galvão Group, the concessionaire posted an EBITDA of R$175 million.
The asset manager attracted Canadian funds to the company, including an investment last year in the competition for Cedae. An industry analyst estimates that, with the operation in Rio, the annualized EBITDA is around R$1 billion today.
*By Maria Luíza Filgueiras — São Paulo
Source: Valor International