BBVA, Itau Said to Weigh Buying Banco Patagonia for $1.5 Billion

  • Deal seen fetching 2 1/2 times book value, below market value
  • Macro, Galicia might have to raise capital for transaction

Banco Bilbao Vizcaya Argentaria SA and Itau Unibanco Holding SA are among banks considering an acquisition of Argentina’s Banco Patagonia SA, according to people familiar with the matter.

A purchase could total about $1.5 billion, or 2.5 times book value, the people said, asking not to be identified because the discussions are private. Local banks including Banco de Galicia Y Buenos Aires SA and Banco Macro SA are also interested in Buenos Aires-based Patagonia, the people said. But both those firms would have to raise capital that might dilute their top shareholders to the point where they could lose control of the new combined company, something they would try to avoid, according to the people.

Patagonia, Banco do Brasil SA’s Argentina unit, has a market value of about $2 billion, though the people said buyers would probably ask for a discount of 20 percent to 30 percent to compensate for inflation, which reduces the value of the company in peso terms.

Banco do Brasil, the biggest bank by assets in Latin America, hired JPMorgan Chase & Co. to help it sell Patagonia, people familiar with the matter said in August. The 58.6 percent stake would go to strategic investors or shares could be sold in a public offering, the person said at the time. Banco do Brasil, with total assets of 1.4 trillion reais ($438 billion), needs to raise capital to offset deepening losses from bad loans.

Officials at Itau, Banco do Brasil and Macro declined to comment. BBVA and Galicia didn’t immediately respond to requests for comment.

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