Has Cemig Overpaid For Terna Participações?

One of Brazil's largest state-controlled utilities companies, Companhia Energetica Minas Gerais (Cemig), has acquired the majority stake in Terna Participações, the Brazilian subsidiary of Italy's Terna SpA, in a move that marks the disengagement of Terna SpA from Brazil's utilities sector. The price paid for the 65.86% stake is equivalent to 8.1 times the 2009 EBITDA (BRL608mn; US$278mn), a price the market evidently thought too high given the 3.4% decline in Cemig's share price following the announcement. Conversely, Terna Participações share increased by 17% - the highest one day rise since its flotation in 2006.

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