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IG4 targets Sabesp following Iguá stake sale

  • IG4 targets Sabesp following Iguá stake sale

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Brazilian investment firm IG4 Capital has announced the sale of its 3% stake in local water company Iguá Saneamento, according to a news report by Globo. Additionally, IG4 Capital has expressed interest in the upcoming privatization of São Paulo’s water utility, Sabesp.

Iguá Saneamento will continue to be controlled by Canadian funds Canada Pension Plan (CPP) and Alberta Investment Management Corporation (AIMCo), who are already partners in the company. In 2021, CPP Investments agreed to invest approximately R$1,178 million (C$270 million) for a 45% aggregate stake in Iguá, partnering with other existing investors including AIMCo.

IG4 Capital decided to end its involvement with Iguá Saneamento as it believes the company no longer requires a restructuring specialist. "We are very proud of Iguá's results. After almost seven years under the management of IG4 Capital, we had our best year in 2023, reaching around R$900 million in EBITDA. When IG4 invested and started restructuring Iguá in July 2017, we only had R$212 million in EBITDA,” stated Paulo Mattos, CEO of IG4 Capital, in a recent LinkedIn post.

"The trend is for Iguá to now be a private corporation (or a public one, if it ever has an IPO), with the reference shareholders of great quality and financial capacity that it already has (CPP, AIMCo, and BNDESPAR). Iguá is ready to grow as one of the best, most sustainable, and most efficient sanitation companies in Brazil," he added.

Iguá recently secured long-term financing for its concession in Rio de Janeiro, addressing one of the group's major pending issues. Concurrently, IG4 Capital is raising a new fund to acquire new businesses in Brazil and Latin America. The fund is expected to have its first closing in June, with around R$600 million, but will remain open for additional funding for another 12 months.

In an interview with Latin Finance, Mattos stated that IG4 is interested in the soon-to-be-privatized water utility Sabesp in São Paulo. “We are raising funds to try to become one of the reference shareholders in the privatization of Sabesp. We are very interested,” he said.

IG4, along with New York-based investment company Water Asset Management, aims to raise $1 billion to invest in Sabesp.

In December 2023, Sabesp selected four investment banks—BTG Pactual BPAC3.SA, Bank of America, Citi, and UBS BB—to manage a follow-on share offering to facilitate the company's privatization. The government expects this transaction to be completed by mid-2024. São Paulo, Brazil's most populous and wealthiest state, owns 50.3% of Sabesp and will retain a minority stake post-privatization. Lawmakers in the state passed a bill in early December 2023 authorizing the privatization.

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