Sanepar shares dip on news of follow-on equity sale

Published November 30th, 2017

Shares in Brazilian water concessionaire Sanepar underperformed the wider market on Wednesday after the company announced a follow-on equity offering which will enable the State of Paraná to further reduce its stake in the company.

The recent consolidation of Sanepar’s share capital into newly formed “units” (each of which represents one ordinary share and four preferred shares) was designed to boost trading liquidity, and was widely seen as a precursor to a further state sell-down.

By announcing the sale of a combined stake representing around 16% of Sanepar’s share capital, both Copel – the state energy company – and the state government can further monetise their strategic holdings, while maintaining a minimum legal controlling stake of 60%.

Analysts at BTG Pactual predict the deal will price in the BRL50 per unit region, at which level they see a compelling risk/return dynamic.

Banco Itaú BBA and BofA Merrill Lynch are leading the offering.