Under the terms of the merger agreement, BTG Pactual will pay US$245m in cash and will give Celfin’s partners a 2.4% share of its capital.
Post merger, BTG Pactual will have US$28 billion in assets it manages for wealthy individuals, including US$5bn in AuM from Celfin Capital.
Commenting on the deal, BTG Pactual CEO Andre Esteves said, "We want to be a reference for high net worth individuals with interest or business in Latin America.
The takeover, which still awaits regulatory approval, will further extend BTG Pactual’s reach into fast-growing economies like Chile, Peru and Colombia. Once the deal is completed, Celfin’s 15 main shareholders will become BTG Pactual partners.
"The flow of investments between the regions’ various countries is increasing strongly. Capital markets are developing at fast pace in Colombia and Peru. We are very optimistic with the perspectives for Latin America," Esteves said.
The acquisition gives the Brazilian bank required financial wherewithal and geographical diversification to establish itself as a major player in the lucrative Latin American wealth management market, which is being eyed by many foreign banking giants including RBS, HSBC and Credit Suisse for their future expansion.
Latin American markets game is already in full swing. Last year, Swiss private banking group Julius Baer acquired 30% stake in Sao Paulo-based independent wealth manager GPS, which had approximately US$5 billion in assets under management.
According to a Reuters report, the deal values BTG Pactual shares at about three times book value. Based on such numbers, the Celfin deal would value BTG Pactual at about US$14.8 billion, almost 50% more than the US$10 billion valuation it got in December 2010, when investors led by buyout firm JC Flowers & Co bought 18.6% of BTG Pactual.
Apart from boosting the bank’s balance sheet, the new market valuation will also boost the credibility of the bank’s brand value and help it better compete with the established brands, when the competition intensifies in the future.