Banco do Brasil Gets $1.35 Billion Bid for Patagonia Unit

  • Itau, BBVA and Banco Macro will proceed to next phase of deal
  • Auction for Argentine bank could be completed within weeks

Banco do Brasil SA received non-binding bids of more than $1.35 billion for Banco Patagonia SA, the company’s Argentina unit, as lenders seek to close a deal in coming weeks, people familiar with the matter said.

Itau Unibanco Holding SA, Banco Bilbao Vizcaya Argentaria SA and Banco Macro SA submitted the highest bids for Patagonia, Argentina’s 11th-largest bank by assets, and will move on to the final phase with binding offers, the people said, asking not to be named because the talks are private. Patagonia has a market value of about $1.97 billion, but buyers asked for a discount to compensate for inflation, which reduces the company’s value in peso terms.

Grupo Financiero Galicia SA, owner of Banco de Galicia SA and the country’s largest financial institution, made a $1.2 billion offer that wasn’t high enough to proceed into the next phase, two people with knowledge of the situation said.

Patagonia trades at about 3.27 times book value. That compares with a median of 1.8 times for Latin American large-cap banks as of March 31, according to data compiled by Bloomberg Intelligence.

Banco do Brasil is selling assets and cutting expenses to help it comply with new capital requirements without assistance from the Brazilian government, its controlling shareholder. The Brasilia-based company has said it might sell Patagonia shares in a secondary offering if it doesn’t reach a deal at its target price.

Market Value

Macro, BBVA, Galicia, Itau and Banco do Brasil declined to comment, as did JPMorgan Chase & Co., which is advising Banco do Brasil.

Banco do Brasil holds almost 59 percent of Patagonia, whose total assets were $4.54 billion as of December. The Jorge Stuart Milne family, which sold a controlling stake to Banco do Brasil in 2010, has the option of asking the bank to acquire their remaining stakes. Milne didn’t immediately respond to calls seeking comment.

Banco Macro, which hired Goldman Sachs Group Inc. to advise it on the bid, has enough resources and access to financing to buy Patagonia, one of the people said. The bank, which is owned by billionaire Jorge Brito, is trying to expand either with acquisitions as they arise or through internal growth, the person said.

Banco Macro could raise more than $600 million, or about 13 percent of its current market value, if a stock offering is approved by shareholders at a planned April 28 meeting. Management requested the capital increase “given favorable conditions for growth in the banking industry in our country,” the company said in a filing Monday.

BBVA, based in Bilbao, Spain, has been considering an acquisition in Argentina as the industry consolidates there, according to Martin Zarich, chief executive officer of BBVA Banco Frances SA, the firm’s local unit. Patagonia’s operations are “perfectly compatible” with BBVA’s, Zarich said in an interview in November.

— With assistance by Felipe Marques, and Andres R Martinez

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