Brazil's Cemig Bids For Portugal's EDP Stake

Companhia Energetica de Minas Gerais (CIG, CMIG4.BR), or Cemig, Brazil's third-biggest power utility, presented a proposal for acquisition of the 21.35% stockholding interest in Portuguese electric company Energias de Portugal (EDPFY), or EDP, the company said late Monday in a statement.

"This proposal is in accordance with the development strategy set out in Cemig's Long-Term Strategic Plan, which specifies the aim of balanced growth in electricity generation, transmission and distribution, through organic growth in the form of new projects and also through mergers and acquisitions," Cemig said.

"EDP operates assets that have great strategic importance and in which a partnership with Cemig could be of mutual interest to both companies," it added.

Analysts expect a negative reaction for Cemig's shares.

"We expect a negative initial reaction despite the fact that Cemig's management had suggested it would look into the deal. In our view, the first reading is negative for Cemig, as we believe the acquisition of a stake in EDP is not a good use of the company's cash and balance sheet. We see negatively the possibility of Cemig having a stake in a company with assets in Europe and the U.S. At market prices, the bid would be worth some 4.5 billion Brazilian reais ($2.56 billion)," Credit Suisse said in a research report for its clients Tuesday.

Earlier this month, Centrais Eletricas Brasileiras (EBR), or Eletrobras, as the Brazilian state-controlled utility is known, also confirmed its proposal to acquire an EDP stake.

--By Rogerio Jelmayer, Dow Jones Newswires; 55-11-3544-7071; [e-mail]