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4-Traders Homepage  >  Equities  >  Toronto Stock Exchange  >  Brookfield Asset Management Inc    BAM.A   CA1125851040

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Brookfield, Renova talks cool over management rights, sources say

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07/13/2017 | 05:59pm CET
People walk to Brookfield Place off Bay Street on the day of the AGM for Brookfield Asset Management shareholders in Toronto

The reluctance of Renova Energia SA's largest shareholder to give up management of the debt-laden Brazilian renewable power firm threatens to derail takeover talks with Brookfield Asset Management Inc (>> Brookfield Asset Management Inc), three people familiar with the matter said on Thursday.

The reluctance of Renova Energia SA's largest shareholder to give up management of the debt-laden Brazilian renewable power firm threatens to derail takeover talks with Brookfield Asset Management Inc (>> Brookfield Asset Management Inc), three people familiar with the matter said on Thursday.

Power utility Cia Energética de Minas Gerais SA wants to be part of a Brookfield-led turnaround of Renova, two of the people said. The utility known as Cemig (>> Companhia Energetica de Minas Gers CEMIG) owns 34.2 percent of Renova.

That stance could sink Brookfield's proposed 1.6 billion-real ($499 million) cash offer for control of Renova, the people said. Cemig plans to first sound out interest from distressed debt giant Oaktree Capital Management LP and two other unidentified funds in Renova, two of the people said.

Reuters reported on Friday that Canada-based Brookfield would buy out the combined 63.5 percent that Cemig, Light SA (>> Light SA) and RR Participações SA have in Renova for 810 million reais. The Canadian firm would then pump an additional 800 million reais into Renova to win full management rights.

Cemig, Light and Brookfield declined to comment.

Snubbing Brookfield, which has made a number of high-profile infrastructure and energy takeovers in Brazil in the past year, is "risky for Renova since it faces a heavy repayment calendar and a fragile cash position," said one of the people, who asked for anonymity due to the sensitivity of the matter.

Renova's units (>> Renova Energia SA), the company's most widely traded class of stock, extended losses on Thursday on the news. The stock shed 2.3 percent to 7.58 reais, compared with a 0.5 percent gain in Brazil's benchmark Bovespa index.

CASH CRUNCH

Units are up almost 30 percent since Jan. 2, on expectations a takeover could save the company from a chronic cash shortage or even bankruptcy. Reuters first reported that Renova could be taken over on March 1.

Renova has struggled with a severe cash crunch over the past couple of years. Financing conditions for Renova, which was founded in 2001, worsened significantly when a partnership with SunEdison Inc collapsed weeks before the latter filed for bankruptcy protection in the United States.

Exiting Renova would allow Cemig, Brazil's No. 3 power utility, to facilitate the refinancing of almost 5 billion reais of debt maturing this year. This week, Chief Financial Officer Adezio Lima said the partial or full sale of Cemig's and Light's stakes in Renova could take up to 60 days.

Interest in Brazil's renewable power industry is growing, especially among foreign investors who see it as a resilient play despite declining electricity consumption and a harsh recession.

(Additional reporting by John Tilak in Toronto and Luciano Costa in São Paulo; Editing by Cynthia Osterman and Phil Berlowitz)

By Guillermo Parra-Bernal

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Financials ($)
Sales 2017 26 064 M
EBIT 2017 -
Net income 2017 -
Debt 2017 -
Yield 2017 1,27%
P/E ratio 2017 97,15
P/E ratio 2018 41,29
Capi. / Sales 2017 1,67x
Capi. / Sales 2018 1,86x
Capitalization 43 532 M
Chart BROOKFIELD ASSET MANAGEMEN
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Brookfield Asset Managemen Technical Analysis Chart | BAM.A | CA1125851040 | 4-Traders
Technical analysis trends BROOKFIELD ASSET MANAGEMEN
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TrendsBullishBullishBullish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 41,8 $
Spread / Average Target -5,0%
EPS Revisions
Managers
NameTitle
James Bruce Flatt CEO, Director & Senior Managing Partner
Frank J. McKenna Chairman
Lori Pearson Chief Operating Officer & Senior Managing Partner
Brian Douglas Lawson Chief Financial Officer & Senior Managing Partner
Jeffrey Miles Blidner Director & Senior Managing Partner
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