Santander to Own 88.3% of Brazil Unit After Purchase Offer

Banco Santander SA, Spain’s biggest bank, said investors holding 13.65 percent of its Brazilian unit’s minority shareholders accepted the company’s offer to buy their stock in exchange for newly issued shares.

The lender will now own 88.3 percent of the Brazilian unit, the Santander, Spain-based bank said in a filing to regulators today. The bank will remain listed in Sao Paulo, Santander said in April.

Santander Brazil’s shares dropped 7.6 percent to 13.18 reais at 12:28 p.m. today in Sao Paulo trading, after falling as much as 13 percent earlier today, the biggest intraday drop on record.

The bank will issue about 371 million shares, representing about 3.09 percent of Santander’s capital, to exchange for the Brazilian shares tendered in the offer.

Santander announced its proposal to offer as much as 4.7 million euros ($5.9 billion) to buy back as much as 25 percent of the outstanding shares earlier this year, offering to pay 20 percent more than their market price at the time. Chief Executive Officer Javier Marin said the deal was a vote of confidence in Brazil and its local subsidiary, whose shares have fallen about 33 percent in the past five years.

Santander shareholders approved the plan at a September event hosted by Chairman Ana Botin less than a week after the death of her father, former Chairman Emilio Botin.

Profit from Brazil was 758 million euros in the first half of the year, or 19 percent of the group’s total earnings. Santander plans to announce third-quarter results on Nov. 4.

The bank estimates the deal will increase net income by 7 percent in 2015 and 2016. The transaction will add 3 basis points to the Basel III core capital, the bank said in April. A basis point is equivalent to a hundredth of a percentage point.

The acceptance rate was lower than the level required for Banco Santander to have to buy the remaining outstanding units and shares from any investor who wants to sell at the same price in an additional offering through the exchange in the next three months, the lender said.

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