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Brazil's Cetip Soars After Buying GRV for $1.2 Billion in Cash-Stock Deal

Cetip SA - Balcao Organizado de Ativos e Derivativos rose the most in six months after agreeing to buy GRV Solutions SA, a provider of credit-risk management services, for 2 billion reais ($1.2 billion), boosting the product offerings of Brazil’s biggest clearinghouse.

Cetip gained 4.9 percent, the most since May 21, to 21.50 reais at the close of trading in Sao Paulo at 3 p.m. New York time. Earlier, the shares rose as much as 12 percent, the most since the company went public in October 2009.

Cetip said yesterday in a regulatory filing that it will pay 1.555 billion reais in cash and 455 million reais in stock for 100 percent of GRV. The clearinghouse will in part finance the purchase by selling 900 million reais of seven-year bonds in the local market. Upon completion of the transaction, GRV shareholders will own about 9.4 percent of Cetip, according to the statement.

“The deal optimizes the capital structure of Cetip, doubles the size of earnings at Cetip and is done at a reasonable multiple,” Frederic de Mariz, an analyst at JPMorgan Chase & Co. in Sao Paulo, who reaffirmed his “overweight” rating on Cetip, wrote in a report. “We have a very positive view on this transaction.”

Latin America’s largest economy has recorded 387 mergers and acquisitions worth a total of $72.9 billion over the past 12 months, with an average disclosed deal size of $312.7 million.

‘Significant Expansion’

“GRV’s activities complement the products and services currently offered by Cetip and reach almost the same client base,” the company said in the filing. The acquisition will mean “a significant expansion” of services offered, Cetip said.

GRV canceled in June a plan to sell shares in Brazil. Last month, Cetip signed a letter of intent with Deutsche Boerse AG’s Clearstream Banking SA unit to establish an electronic platform to initially trade fixed-income securities.

Itau BBA, a unit of Itau Unibanco Holding SA, and Bradesco BBI, a unit of Banco Bradesco SA, advised Cetip in the acquisition. Credit Suisse AG was the adviser for GRV.

To contact the reporter on this story: Helder Marinho in Sao Paulo at hmarinho@bloomberg.net

To contact the editor responsible for this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

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