Cielo Advances as Controllers Said to Give Up on Takeover Deal

  • Shares rally as Bradesco, Banco do Brasil won't buy Elavon
  • Elavon could `steal' market share from Cielo: Lerosa

Brazilian credit-card processor Cielo SA led gains on the Ibovespa as its controlling shareholders were said to give up on a plan to buy a stake in payment-processor Elavon Inc.’s Brazilian unit.

Cielo had lost 15 percent in the week through Thursday on speculation Banco do Brasil SA and Banco Bradesco SA planned to acquire its competitor and keep it as a separate unit as a way to increase profits in an industry that’s seen as more resilient amid an economic recession. Elavon charges lower fees and could “steal” Cielo’s market share, according to Vitor Suzaki, an analyst at brokerage Lerosa Investimentos.

The two banks backed off from the idea after antitrust regulators signaled they would impose restrictions before approving the deal, according to two people familiar with the matter.

"Minority investors were not happy with the prospects of having the controlling shareholders as rivals," Suzaki said in a phone interview from Sao Paulo. "Now, they feel relieved."

Shares climbed 3.6 percent to 29.10 reais at noon. in Sao Paulo.

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