BTG Said to Plan Equity Grant to Traders at Commodities Unit

  • Executives including CEO Ricardo Leiman to have stake in firm
  • Deal aimed at keeping staff as bank recovers from CEO arrest

Grupo BTG Pactual is planning to grant equity in its commodity-trading unit to top managers and traders in a deal that would give minority ownership to the business’s key staff including Chief Executive Officer Ricardo Leiman, according to two people with knowledge of the matter.

If it goes ahead, the plan could value BTG Pactual Commodities at more than $1 billion, said one of the people, who asked not to be identified because the discussions are private. The unit was set for a profit of more than $426 million last year before taxes and bonuses were paid, according to a document seen by Bloomberg News.

The move is intended to retain top talent and preserve the value of the commodities business, started in 2013. It’s also aimed at reassuring lenders and trading partners after the Brazilian bank’s founder and former CEO Andre Esteves was arrested in November in a corruption investigation, the people said. BTG held talks with potential buyers for the commodities unit late last year, but the discussions didn’t yield a deal.

Under the proposal, a group of 25 to 30 senior managers and traders would be granted equity and would convert some deferred bonus payments into shareholdings. The plan for senior management to have a minority interest in the business is still being negotiated and would require approval from BTG Pactual’s board and Brazilian regulators, one of the people said.

BTG declined to comment. Esteves, who was moved to house arrest from jail in December, has denied any wrongdoing through his lawyers. BTG has said it isn’t part of the investigation.


Senior Managers

The exact structure of the proposed transaction has yet to been finalized, the people said. Leiman and other senior managers and traders won’t have a majority stake after the deal, the people said.

Under the leadership of Leiman, a former CEO at Noble Group Ltd., the commodities unit has grown rapidly in two years to secure a place behind some of the world’s biggest trading houses. BTG expects to trade 30 million metric tons of raw materials including grains, sugar, oil and metals in 2016, according to the document obtained by Bloomberg.

In addition to Leiman, Chief Risk Officer Dean Morris, Chief Operating Officer Nick Brewer and Chief Financial Officer Gabriel Melamed are among the core management team at the firm.

BTG Pactual’s total 2015 net income climbed to 4.62 billion reais ($1.18 billion) from 3.42 billion reais the previous year, according to results published on the company’s website. It didn’t give a separate figure for the commodities unit.

‘Asset Light’

Based in London and with more than 650 employees in 34 offices worldwide, BTG Pactual’s commodities unit “has been premised on an ‘asset light’ strategy with three main components of revenue and returns: credit returns, physical merchandising and financial proprietary commodity trading,” according to the document.

Coal trading accounted for 40 percent of revenue in 2015, energy 24 percent, iron ore 15 percent and agriculture 11 percent. The firm is also one of the largest global warehousing companies, it said.

BTG Pactual Commodities had access to approved credit facilities of $6.7 billion in 2015, according to the document. BTG Pactual Bank accounted for $525 million of the total credit. Twelve European banks accounted for $3.9 billion of the commodity unit’s financing including $2.3 billion in secured and unsecured lines. 

The equity value of BTG’s commodity unit increased from $355 million in 2013 to $1.4 billion in 2015, according to the document.

Assets managed by Grupo BTG Pactual’s main macro hedge fund plunged by about 88 percent since November, according to a person familiar with the matter, falling to less than $500 million from more than $4 billion following Esteves’s arrest, Bloomberg reported on Feb. 5.

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