China State Grid has 30 days to recalculate price in CPFL unit's tender offer
(Updates share price, detail on valuation method)
By Tatiana Bautzer
SAO PAULO, May 3 (Reuters) - China State Grid Corp Ltd has 30 days to recalculate the price of a mandatory tender offer to minority shareholders in the renewable energy unit of Brazil´s power holding company CPFL Energia SA, according to documents released by securities industry regulator CVM on Thursday.
The CVM board said it had removed a demand for a minimum share price in the offer but said the Chinese company had to change the valuation method for the shares.
State Grid acquired a controlling stake in CPFL and its subsidiary, CPFL Energias Renováveis SA for 17.36 billion reais ($4.90 billion).
Under Brazilian securities law, a tender offer to minority shareholders in CPFL Renovaveis is mandatory.
In October, a group of minority shareholders in CPFL Energias Renováveis filed a complaint with CVM questioning the price set by State Grid to buy them out. They argued that State Grid's tender offer to minority shareholders in the parent company had a higher premium.
The Chinese company offered 12.20 reais per CPFL Renovaveis shares. A previous decision by the regulator's technical body had established a minimum price of 16.60 reais per share and the board agreed the regulator should not set price.
Depending on the final price of the offering, which is yet to be decided, State Grid may have to pay 4 billion reais ($1.1 billion) for the renewables unit, $281 million above its initial offer.
After losing 6 percent at market opening, CPFL Renovaveis shares were down 2 percent in mid-morning trading in Sao Paulo, at 14.83 reais per share.
Although scrapping the request for a minimum price, CVM decided the valuation methodology has to change. Instead of considering previous profitability to calculate the price, State Grid will have to base its new offer on future profits projected for the renewables unit. It did not mention a price.
The methodology would consider projections for earnings before interest, taxes, depreciation and amortization, a common gauge of operational profitability known as EBITDA, through 2020.
According to calculations in a former decision by CVM's technical division, this would mean a price of 17.67 reais per share.
One person close to CPFL Renovaveis' group of minority shareholders that initiated the complaint with the regulator said on Thursday the group is satisfied with the CVM decision.
According to the person, the valuation method chosen was one of the alternatives the group had suggested earlier, because the company expects higher growth in the renewables unit than in its parent. ($1 = 3.5454 reais) (Reporting by Tatiana Bautzer Editing by Chizu Nomiyama, Bill Trott and Susan Thomas)
