The market value of Brazil’s largest electricity distributor, Eletropaulo Metropolitana has doubled in the past month thanks to a fierce bidding war between European rivals Enel and Iberdrola.

According to analysts, the intensity of the bidding process has served to over-inflate the price of the deal.
Eletropaulo Metropolitana
Iberdrola’s latest – and third – offer was 32.1 reais per Eletropaulo share on April 26, a 90 per cent premium to the share price on March 27, before the bidding war started.

Enel reacted within hours by hiking its own bid to 32.2 reais. With net debt of 4.2 billion reais, the Brazilian company has an enterprise value of 9.6 billion reais at these prices. That is 8.7 times analysts’ expectations for EBITDA in 2018, compared with an average multiple of 6.6 in a sector where peers tend to have a better profitability.

The winning company would have to deliver significant annual synergies next year to make the deal profitable once acquisition is secured.

 Brazil’s securities regulator has set a May 18th deadline for companies to bid for Eletropaulo in a live auction on the local stock exchange.Reuters on April 26 reported that Iberdrola had attacked state-controlled Enel’s behaviour in a letter to the European Commission.

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