Shareholders of EDP-Energias de Portugal voted on Wednesday to effectively block a 9 billion euro ($10 billion) takeover bid by China Three Gorges (CTG), but the Portuguese utility said their partnership would continue, with a focus on Latin America.
The proposed scrapping of a 25 percent voting right limit was a key condition of CTG’s attempt to buy Portugal’s largest company, but it was opposed by activist investor Elliott and rejected by shareholders at a meeting on Wednesday.
Portugal’s stock market regulator had said such a rejection would put an end to the offer.
This could open the way to an alternative proposal by Elliott, which has a 2.9 percent stake in EDP, for the group to raise 7.6 billion euros from the sale of its Brazilian operation, Iberian thermal holdings and minority stakes in Spanish and Portuguese networks. EDP could then focus on further developing its alternative energy business, Elliott has said.
Analysts had doubted CTG’s likelihood of moving ahead with the bid because of a long delay to formally launch it after it was first announced in May 2018 and opposition from U.S. authorities to Chinese control of EDP’s sizeable wind energy business in the United States.
“What happened today had to do with this particular offer and not with the company’s future … the partnership with CTG is to be maintained,” EDP Chief Executive Antonio Mexia told reporters.
The Chinese state-owned company is the largest shareholder in EDP with a 23 percent stake.
“It has all the potential, all its strength, we are calm about both the company’s future and the partnership with CTG,” he said. He added that EDP and CTG would do everything to create value for shareholders, with a focus on Latin American operations where they hope to enter new markets.
“About the rest, we will see … all options are open.”
CLEAR VOTE
Sources familiar with the matter told Reuters last month EDP could propose a joint venture with CTG allowing the Chinese firm to expand its foothold in Brazil and Latin America.
CTG is among Chinese state-backed companies that have been increasing their investments in Europe over the past few years.
Even though Portugal’s government had supported the offer, tighter regulatory scrutiny across the European Union has cast doubt on whether the Chinese expansion can continue.
Changing the voting rights needed the support of two-thirds of shareholders present at the general meeting, but nearly 57 percent of those present voted against, shareholders said.
“Shareholders voted clearly, they were against the offer,” said one. Investors present at the meeting accounted for just over 65 percent of the voting capital, EDP said.
Portugal’s CMVM market regulator warned CTG on April 12 that its bid would fail if shareholders rejected the rights change, unless CTG withdrew it as a condition of the offer. CTG refused on Monday to give up the condition and has said that it will remain a long-term strategic investor in EDP.
EDP in March announced plans to sell 2 billion euros worth of assets in Portugal and Spain, and raise another 4 billion euros via an asset rotation programme until 2022 to fund its expansion in renewable energy.
EDP’s board had rejected CTG’s 3.26-euro offer per EDP share as too low and the bid was never formally launched, pending a green light from regulators in various countries.
EDP shares fell on Wednesday to close 0.6 percent lower before the vote, but at 3.4 euros they are still well above CTG’s offer price.
Source: Reuters.com