BTG Pactual Investors May Reap 60% Returns in Bank IPO

J.C. Flowers & Co. and the Agnelli family that controls automaker Fiat SpA are among Banco BTG Pactual SA (BBTG11) investors who may gain as much as 60 percent selling stakes in the Brazilian lender’s initial public offering.

BTG, led by billionaire Andre Esteves, may be valued at as much as 29.4 billion reais ($15.8 billion), or 3.5 times book value, if the units are sold at the highest level of the range the bank proposed in a regulatory filing ahead of the offering. The units, which represent shares of the bank and BTG’s private- equity firm, are set to price on April 24 and begin trading in Sao Paulo and Amsterdam two days later.

The Agnellis and J.C. Flowers, the New York-based private- equity firm founded by financier J. Christopher Flowers, are part of a group that paid $1.8 billion in December 2010 for a stake of almost 19 percent that valued Sao Paulo-based BTG at about $10 billion.

Those investors could sell as much as 24.3 million units out of a total of 121.5 million. They may divest as much as 2.8 percent of their holdings at the IPO, 40 percent after six months and the rest after a year. Until then, BTG’s free float will be below the 25 percent needed for the company to receive a so-called Level 1 corporate-governance rating from BM&FBovespa SA, the operator of Latin America’s biggest securities exchange.

Goldman Sachs, JPMorgan

The float, a measure of shares readily available in the market, will be 10.3 percent immediately after the IPO and could climb to almost 14 percent if underwriters including Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) exercise an option to sell 31.5 million additional units.

A BTG official declined to comment, citing a “silent period” before the IPO. A spokesman for Exor SpA, the Agnelli family’s holding company, declined to comment and a J.C. Flowers spokesman didn’t immediately respond to a request for comment.

The bank probably will arrange for a new offering in six months through an institutional book-building process to avoid selling pressure on the company’s shares, said two people familiar with the matter who asked not to be identified because the IPO is pending.

BTG sold a stake of about 16 percent in December 2010 for $1.55 billion to the group of investors, which also includes the Rothschild family, Government of Singapore Investment Corp., China Investment Corp. and Abu Dhabi Investment Council. Company executives, including Esteves, at the same time invested $250 million representing about 2.6 percent of the bank’s capital.

Shares held by bank executives, excluding the group’s investment, or about 81 percent of the company’s capital, can be sold for no more than book value to ensure their compensation is tied to the firm’s long-term performance.

Regulatory Approval

Partners at Chilean brokerage Celfin Capital SA, which has agreed to be acquired by BTG, may reap gains of more than 85 percent, based on the top price in the range proposed by BTG. The firm said in February it plans to buy Santiago-based Celfin for $486 million, of which $196.6 million will be used to buy almost 19.9 million BTG units if the central bank approves the deal, according to the filing.

While BTG said in the filing that it expects the shares to be priced from 28.75 reais to 33.75 reais apiece, the Celfin partners will pay just $9.90, or about 18.5 reais, a share.

A Celfin spokesman declined to comment.

Inside Information

Esteves, who was fined this week by Italy’s stock-market regulator for trading on inside information in 2007, would own at least 22 percent of the company and control 84 percent of the voting shares in the bank after the offering, according to the filing. The holding could be valued at 6.6 billion reais if the units sell at the top of BTG’s range. Esteves plans to appeal the fine, the company has said.

Each of the 90 million units to be sold next week, excluding the underwriter’s option to sell more, conveys one voting share and two non-voting shares of BTG Pactual and three shares of BTG Participations Ltd., the holding company that owns BTG’s private-equity business. The units will be converted into six shares that can be sold individually after the central bank approves the IPO.

The entire group would be valued at 29.43 billion reais if the units price at the top of the range, with the bank representing 80 percent of the total, according to the filing.

BTG plans to use the IPO proceeds to “continue expanding its businesses” and to improve its “funding structure,” according to the filing.

To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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