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The Federal Court of Accounts (TCU) confirmed Tuesday the May 18 date for the resumption of the Eletrobras privatization trial. Contaminated by political polarization, the operation gained a curious chapter last week, when TCU member Aroldo Cedraz surprised his colleagues by suggesting that an eventual attempt to retake control of the company by the government would be eased.
Rapporteur of the matter in the public spending watchdog, Mr. Cedraz delivered his opinion to his colleagues less than two hours before the beginning of the session. Among the proposals was a change in the mechanism that aims to protect minority shareholders against the takeover by means of a hostile bid, known as the “poison pill.”
A week earlier, Twitter’s board had triggered the poison pill against the onslaught of businessman Elon Musk. Not even this strategy, however, was enough to stop the billionaire, who now owns the social media.
In Brazil, the tool has also been dubbed the “anti-Lula clause.” Leader in the polls for this year’s election, the former president has already spoken out against the privatization of Eletrobras, and his allies said he would reverse the operation if elected.
To make such a maneuver more difficult, the Brazilian Development Bank (BNDES) has included a poison bill in the privatization model. Anyone interested in taking control of Eletrobras — whether the federal government or a private-sector organization — would have to pay a high amount to the other shareholders and then convince them to change the company’s bylaws.
Under the rules in force in the model delivered to the TCU, the person interested in taking control must make a public offer to buy the stakes of the other shareholders at a price three times the highest stock price recorded for the asset. Even so, even with a share of more than 50% of the voting capital, the voting power would be restricted to 10%.
To break this second barrier, a shareholders’ meeting would have to be called to approve the change in the bylaws. Mr. Cedraz considered those conditions “unfair” for an eventual strategic need for the retaking of the company by the federal government. He then proposed a kind of antidote to the poison.
“In order to protect the prerogative of the federal government to, at any time, reverse the privatization process of Eletrobras, by paying fair — but not exorbitant — amounts to the other shareholders, this TCU member proposes the revision of the poison pill clause suggested by BNDES,” he said.
His central argument is based on the strategic importance of freshwater reservoirs, which has led some governments to meddle to prevent market abuses by private-sector hydroelectric generation companies.
“This kind of intervention has proven necessary, mainly because of the ongoing global power crisis and transition. While France resumes studies to nationalize a large company in the electricity sector, Spain and Portugal present to the European Union a plan for state intervention in the sector through measures aimed at lowering power prices in the Iberian Peninsula,” the rapporteur argued.
The proposal surprised the market, and even more the other TCU members. President Jair Bolsonaro’s main ally in the court, Jorge Oliveira, was warned by technicians in his office about the antidote and called member Benjamin Zymler, considered a technical reference in the electricity sector.
The two acted quickly and, a few minutes before the beginning of the trial, convinced Mr. Cedraz to back off. The rapporteur announced the withdrawal of the idea in the middle of the reading of his vote, which caused another surprise in the room, the second in a few hours. “Shame on you,” said one member during the session.
With Mr. Cedraz’s change, the “anti-Lula clause” was preserved. According to Valor, the rapporteur was convinced that it would not be necessary to privatize in order to avoid abuses by a private partner. In such a situation, the federal government could simply cancel the Eletrobras concessions and take over the contracts through a new state-owned company.
Source: Valor International