Scotiabank Buys Majority of Cencosud’s Chile Card Unit

Bank of Nova Scotia agreed to pay $280 million for retailer Cencosud SA’s credit-card and consumer-loan operations in Chile to become the Latin American country’s third-largest card operator.

Scotiabank will buy 51 percent of the financial-services unit and take over the entire loan portfolio, transferring an additional $1.2 billion to Cencosud, the companies said in separate filings to Chile’s securities regulator.

“This transaction will also increase our scale in Chile’s growing consumer-lending market and is consistent with our focus on growing in key markets in Latin America,” Wendy Hannam, Scotiabank’s executive vice president for the region, said in an e-mailed statement yesterday.

Scotiabank Chief Executive Officer Brian Porter, who took over as head of the Toronto-based bank in November, has been seeking to expand in credit cards as he renews focus on Latin America, with emphasis on Chile, Peru, Mexico and Colombia.

Cencosud will have an option to buy back Scotiabank’s 51 percent stake after 15 years. Scotiabank, Canada’s third-largest lender by assets, has a similar partnership arrangement with Cencosud in Colombia through Banco Colpatria.

This is the second time Cencosud has sought to sell the loans business as rising debt levels put its investment grade rating at risk. Moody’s Investors Service and Fitch Ratings both reiterated negative outlooks for Cencosud after an earlier deal with Brazil’s Itau Unibanco Holding SA was called off.

In June of last year, Itau had agreed to pay $307 million for 51 percent of Cencosud’s cards and consumer-loan business in Chile and Argentina, plus $1.3 billion for the loan book. The two companies called off the accord in December, saying they failed to reach a binding agreement.

The latest deal follows Scotiabank’s May 8 agreement in Canada to buy a 20 percent stake in Canadian Tire Corp.’s financial-services business, giving it access to the retailer’s customers.

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