André Esteves, Brazil’s youngest self-made billionaire, has come a step closer to fulfilling his goal of creating Latin America’s equivalent of Goldman, Sachs & Co with a proposed tie-up between BTG Pactual, Brazil’s leading independent investment bank, and Celfin Capital, one of Chile’s top financial institutions.
On Wednesday, August 24, the two firms announced that they had signed a memorandum of understanding with a view to merging the businesses. They have informed their respective regulatory authorities and are now undergoing due diligence. The deal is expected to be completed within one month. They will not reveal the terms and are painting the deal as a merger of equals. In reality, however, BTG Pactual is far bigger and will gobble up Celfin.
In December a consortium of foreign investors — including China Investment Corp., Government of Singapore Investment Corp. and the Ontario Teachers’ Pension Plan — bought a 18.65 percent stake in Pactual for $1.8 billion, valuing the whole group at about $10 billion.
Also in December, Matías Eguiguren, a former Celfin partner who had been responsible for international distribution, sold his 5 percent stake in the group to other partners for $15 million so that he could pursue a role in government. That would value the whole firm at about $300 million.
For a long time, Esteves has spoken of his ambition to create the biggest investment bank in Latin America and one of the leading asset managers in the emerging markets. In Latin America, he said, he wanted to achieve this through strategic alliances or acquisitions. The Celfin deal will give Esteves a springboard to develop the business in the Andean region, which has the continent’s most dynamic capital markets outside Brazil.
Celfin has a strong presence in Peru as well as in Chile and is developing its operations in Colombia. In Chile, Celfin has a 17.3 percent market share in third-party trades, and in Peru it has a 12.1 percent share, according to the stock exchanges of the two countries. Recently, the firm said it planned to open a brokerage in Colombia in September. In Chile only LarrainVial, an independent investment bank, has a bigger market share in third-party trades: 20.6 percent.
On August 19, BTG Pactual announced that it had filed a request with Brazil’s regulators to become a public company, paving the way for an IPO that many experts believe will happen next year or in 2013.
