(Adds details about Igua’s interest in privatization, the advisor in charge of selling Cedae)
SAO PAULO, March 22 (Reuters) – Canadian pension fund CPPIB acquired a 45% stake in Brazilian sanitation company Igua Saneamento SA for 1.18 billion reais ($ 213 million), according to a statement on Monday.
CCPIB said it would acquire 514 million reais ($ 93.4 million) of new shares issued by Igua Saneamento and 664 million reais in existing shares.
The deal reinforces Igua’s bid for the privatization of Rio de Janeiro’s Cedae sanitation company, a source with knowledge of the matter said on Monday.
Igua has hired investment banking units Banco Bradesco SA and Banco BTG Pactual SA to advise on bids in the auction scheduled for April 31, added the person, who requested anonymity to reveal private discussions.
CPPIB’s support could also help fund another deal the company is considering, the privatization of the sanitation company Corsan, in the state of Rio Grande do Sul, the source added.
After CADE approves the acquisition of CPPIB, existing investor Alberta Investment Management Corporation (AIMCo) will hold a 39% stake in Igua, Brazilian development bank BNDES will own 11% and private equity firm IG4 Capital Group will retain 5%.
CPPIB said the two private equity funds managed by IG4’s asset managers would remain Igua’s controlling shareholders.
This new funding round underscores investor interest in the sanitation sector as new laws passed in June are expected to encourage states and cities to privatize water and sewage companies and to universalize services in Brazil.
For now, Igua is suspending plans for an immediate initial public offering expected for this year. However, Igua kept a mid-term plan for listing. The CPPIB acquisition contract has a clause in which the company commits to conduct an IPO within three years. ($ 1 = 5,5057 reais) (Reporting by Carolina Mandl and Tatiana Bautzer in Sao Paulo Editing by Bernadette Baum and Matthew Lewis)