Latin Finance - January/February 2012 - 43

BTG Pactual $1.8bn Stake Purchase

Private Equity Deal

From Strength to Strength
F
rom its creation in 1983 as a modest securities dealer shop in Rio de Janeiro, BTG Pactual has covered a lot of ground, becoming one of the leading investment banks in Brazil under chief executive André Esteves. It was probably an indication of the bank’s success, and the rising fortunes of Brazil itself, that BTG Pactual managed to raise $1.8 billion from the sale of an 18.6% stake in its business in December 2010 to a group of the world’s most recognized investors, including sovereign wealth funds. The transaction diversiﬁed the bank’s investor base, and also gave the ﬁnancial institution the funds to strengthen its investment banking, asset management and wealth management businesses. As Esteves put it at the time, the sale was a step towards the 10-year goal of making BTG Pactual the largest emerging market ﬁnancial ﬁrm. Striking a deal was not easy. The negotiations went on for months, giving way to speculation about the stake to be sold, the ﬁnal price and of the eventual makeup of the investor group. When all was said and done, the ﬁnal $1.8 billion deal valued the bank at roughly $10 billion, essentially four times book value. The transaction gave BTG Pactual shareholders’ equity of $4.3 billion. Just a year earlier, Esteves had paid $2.5 billion to get the ﬁrm back from UBS. Competing banks at the time traded at 3.2 times book value. BTG’s own M&A operation and Goldman Sachs advised BTG on the transaction, while Citi advised the investors. If the sales ﬁgure was a surprise to some, the names of the buyers gave the deal some gravitas.

Five investors led the group, namely private equity ﬁrm JC Flowers, the Government of Singapore Investment Corporation, the Ontario Teacher’s Pension Plan, the China Investment Corporation, and the Abu Dhabi Investment Council. Also involved were RIT Capital Partners, the Santo Domingo Group, Italy’s Agnelli family, Lord Rothschild’s family, Inversiones Bahia of the Motta family and senior BTG Pactual management.

Cross-Border M&A
AEI Sale of LatAm Assets

Mega Sale
hen AEI moved to sell o its Latin American power and gas distribution business and focus only on power generation, the unloading of 80% of its assets, worth some $4.7 billion, was not an easy task. Several decisions needed to be made against a complicated market backdrop, making the sale, known as project Amapola, one of last year’s most complex. Executives decided on the strategy shortly after the group, formerly known as Ashmore Energy International, attempted an initial public o ering of shares in October 2009. Facing markets in turmoil and analyst concerns about AEI’s debt load and its exposure to political and operational risks in a number of countries, the IPO failed to generate enough investor appetite. Opting to unload the LatAm assets, though, it still faced the decisions of whether to sell them in pieces or all at once. Advised by Goldman Sachs and Itaú BBA, the company chose to do a single transaction, albeit to a group of several buyers, resulting in a deal that involved selling 10 operating companies to six di erent buyers. Negotiating the prices for all the di erent assets was one of the most challenging aspects of the deal, bankers say. “The idea was to sell the entire portfolio of assets in LatAm, but the crown of the deal was the Brazilian portion,” says Fernando Iunes, executive director for investment banking at Itaú BBA. Indeed, Brazilian energy distributor Elektro, the power supplier for 2.2 million customers in São Paulo, was sold to Spain’s Iberdrola for €1.78 billion ($2.4 billion). The deal implies a $2.9 billion enterprise value (EV) for Elektro, and an EV-to-Ebitda multiple of 5.8, according to Santander, which along with Citi advised the buyers and advised Iberdrola in coordinating a consortium. The bank

Esteves: Making BTG EM’s largest ﬁnancial ﬁrm The next step involves the bank’s initial public o ering of stock, a move that has been rumored since Esteves purchased the ﬁrm back from UBS in 2009. Though the private investment can’t replace an IPO, it is seen as allowing the bank to put such an o er o for a few years and still have resources to grow. BTG Pactual ﬁnally requested regulatory approval for an IPO in August 2011, though the timing will depend on an improvement in the poor market conditions that have hurt many initial o erings from the region. Brazilian regulators approved the IPO plans in early November. The ﬁrm has said there is no rush to issue shares to the public. The IPO may or may not happen sometime in 2012, but markets are following BTG Pactual’s next move. LF

January/February 2012

LATINFINANCE 43

Latin Finance - January/February 2012

Table of Contents for the Digital Edition of Latin Finance - January/February 2012