Sabesp and EMAE Maintain Merger Vote Date Despite CVM Appeal and Lawsuit; SBSP3 Drops 2.14%

Utility companies Sabesp (SBSP3), São Paulo’s water and sanitation provider, and EMAE (EMAE3) confirmed that their Extraordinary General Meetings (AGEs) scheduled for July 30, 2026, will proceed as planned, despite a formal request to the Comissão de Valores Mobiliários (CVM) and a corresponding judicial lawsuit filed by a minority shareholder seeking to postpone the vote. The announcement injected volatility into the acquirer’s stock, with Sabesp (SBSP3) trading down 2.14% to R$ 28.38 by the end of the trading day, while the Ibovespa (IBOV) remained flat at 175,334.45 points.

The dispute centers on the proposed valuation for the incorporation of EMAE into Sabesp, which will make the former a wholly-owned subsidiary. The transaction structure offers EMAE shareholders 1.319 Sabesp common shares for each EMAE share. This exchange ratio implies a valuation for EMAE of approximately R$ 32.15 per share, a figure that the minority shareholder argues severely undervalues the energy company. The shareholder challenge is amplified by the fact that Sabesp paid R$ 61.85 per share to acquire control of EMAE earlier this year, and EMAE had previously been privatized at a valuation closer to R$ 70 per share in 2024.

The significant disparity between the current merger valuation and recent historical prices is the core mechanism driving investor concern and legal action. The minority shareholder, who holds a large block of non-voting preferred shares, argues that the documents supporting the valuation are insufficient and has questioned the independence of the committee that negotiated the share swap. This merger mechanism supersedes the previously discussed mandatory public tender offer (OPA) that was triggered when Sabesp acquired control, which had a price of R$ 61.83, leading to an 80% tag-along price of R$ 49.46 for common shares. The move to a share-for-share incorporation based on a lower valuation has shifted the battleground for small-cap utility investors.

Both Sabesp, whose stock trades under the US-facing ticker SBS, and EMAE, an integrated energy utility, stated in a joint filing that no judicial or regulatory decision has been issued to suspend or delay the assemblies. Sabesp affirmed that the operation adheres to applicable regulations and CVM guidelines. For dissenting EMAE shareholders who object to the merger, the official withdrawal right (reimbursement) is set at a notably low R$ 16.79 per share, a figure that is unlikely to appeal to most investors.

The key focus for investors now is the shareholder meeting on Thursday, July 30. The outcome of the CVM’s review of the postponement request and the judicial ruling on the precautionary lawsuit remain open variables that could affect the efficacy of the vote, even if the resolutions are approved. The result will determine the final consideration small-cap holders of EMAE shares will receive and will mark the next step in the operational consolidation of the two São Paulo-based companies.