By Brazil Stock Guide – Copasa is finalizing the structure of a share offering expected to lead to its privatization as early as March, according to people familiar with the matter. Under the model under discussion, the Minas Gerais state government would sell a 30% stake in the sanitation company to a reference investor and an additional 15% through a market offering, allowing broader investor participation.
Depending on pricing dynamics, the transaction could ultimately result in Copasa becoming a widely held company with no defined controlling shareholder, the people said.
The proposed structure seeks to address criticism surrounding the privatization of Sabesp, where the valuation was widely seen as unfavorable to the state. In Copasa’s case, the objective is to ensure that Minas Gerais does not leave money on the table, according to a Valor Econômico report.
Under the model, the price for the shares would be set after collecting non-binding purchase intentions from potential reference investors. If the subsequent sale of the 15% stake to the market is priced below the agreed level, the reference investor would be required to pay the difference to the state, effectively matching the full price previously set.
The reference investor may also participate in the market tranche, potentially increasing its stake beyond the initial 30%, one person familiar with the matter said.
If market pricing exceeds the level proposed by the reference investor, that investor could be excluded from the transaction altogether. In that scenario, Copasa would transition to a dispersed ownership structure, becoming a so-called corporation.
In a statement, Copasa said it has received official communications from the Minas Gerais state government establishing guidelines for the privatization process and added that issues related to the transaction should be addressed by the government.
The state government said the plan provides for a secondary share offering, with no issuance of new shares, and that service provision, contract execution, universalization targets and regulatory commitments will not be affected during the process. The administration added that the model allows for a strategic investor, subject to proof of financial capacity, infrastructure experience and commitment to legally mandated universalization goals.
Copasa has previously disclosed key premises of the proposed structure, including the allocation of up to 30% to a reference investor, the option for the state to retain a 5% stake or fully exit if the company becomes widely held, and the possibility of a lock-up preventing the strategic partner from selling shares before 2033 or until universalization targets are met. The company also said voting rights for the reference investor would be capped at 45% and that it plans to submit a proposal to create a golden share.
Analysts at Itaú BBA highlighted three main areas of uncertainty: the final structure of the transaction, including pricing discussions with the state audit court; the execution of contract amendments with municipalities, particularly Belo Horizonte; and the approvals required for the deal, such as consent from creditors, according to a report by Filipe Andrade, Luiza Candiota and Victor Cunha.
At UBS BB, analysts Giuliano Ajeje and Henrique Simões said the proposed golden share represents another step toward a privatization they expect to be completed in the first half of the year. They added that the market is still awaiting clarity on poison pill provisions and board appointments.
Market sentiment around the privatization has already shifted. Bank of America upgraded Copasa (CSMG3) to buy and raised its end-2026 price target to 70 reais from 32 reais. JPMorgan also lifted its recommendation on Monday, upgrading the shares from underweight to overweight.
Copasa shares were up 2.83% at 53.86 reais in afternoon trading, extending gains of more than 100% over the past 12 months.