Brazil Investor Tanure Weighs Role in Sabesp Privatization

(Bloomberg) -- Veteran Brazilian investor Nelson Tanure is considering taking part in the privatization of Latin America’s largest water utility, Cia de Saneamento Basico do Estado de Sao Paulo, according to people familiar with the matter. 

Tanure has expressed his interest in Sabesp, Latin America’s largest water utility, privately to investors and is considering joining other bidders in its share sale, the people said, asking not to be named in discussing confidential matters. He hasn’t revealed the amount he’s willing to spend and it’s not clear whether he’s interested in becoming a strategic shareholder.

Sabesp shares pared losses after Bloomberg’s report, and were trading 1.8% lower at 73 reais on Sao Paulo’s B3 exchange at 2:30 p.m.

Better known for investing in distressed assets, Tanure is eyeing a new deal after several recent acquisition attempts fell through. He tried to buy a stake in Brazilian healthcare firm Diagnosticos da Americas SA, but the company decided to merge with its rival Amil — which Tanure also tried to snap up in 2023. 

The Sabesp deal, expected to be one of the biggest in Brazilian capital markets this year, is facing tougher market conditions amid increased volatility. Local assets have been sliding as concerns mount about both Brazil’s fiscal outlook and its central bank, which is facing political scrutiny over its approach to inflation. Brazil’s real fell to a new 2024 low Tuesday and local medium-term swap rates have risen some 180 basis points since the start of the year, while the benchmark Ibovespa stock index has fallen 11% over the same period. 

Deteriorating market conditions prompted a consortium that included French giant Veolia Environnement SA and Brazilian alternative asset manager IG4 Capital Investimentos SA to abandon its plan to bid for Sabesp, according to the people. Cosan SA has also decided to step away of the offer, local media reported.

Power company Equatorial Energia SA and private utility Aegea Saneamento e Participacoes SA are the strongest contenders to become Sabesp’s strategic investor, the people said. Aegea has backing from Itausa and Singapore sovereign wealth fund GIC for its bid and is partnering with Brazilian fund Kinea Investimentos.

Neither Tanure, Veolia, IG4 or Cosan immediately replied to requests for comment. Equatorial and Aegea declined to comment. Sao Paulo’s government said the Sabesp share offering is in a quiet period, indicating any additional information would be communicated through the offer prospectus or regulatory filings.

Tanure is a major shareholder in both oil and gas producer Petro Rio SA and real estate firm Gafisa SA. He also has a sizable stake in Rio de Janeiro utility Light SA, which recently struck a debt restructuring deal with creditors but remains under bankruptcy protection.

According to Sabesp’s privatization model, Sao Paulo’s state government will select two strategic investors next month and then build out two separate books in a broader offering. The main reference shareholder will have 15% of the shares. The state intends to reduce its stake in the company to about 20%, from 50.3% currently, and is aiming to complete the share sale by the third quarter.

(Updates with share move in third paragraph.)

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