Itau Unibanco Holding SA ADR (NYSE: ITUB), the largest private lender in Brazil, announced that it had reached an agreement to purchase a controlling stake in Avenue Holding Cayman Ltd, a Brazilian brokerage that offers access to foreign markets. Avenue, which was established four years ago, seeks to democratize access for Brazilian investors
Itau to acquire Avenue for $92 million
According to a regulatory filing, Itau Unibanco will invest 493 million reais ($92 million) for a 35% stake in Avenue, including a cash infusion of 160 million reais and a secondary share acquisition. Itau entred a share purchase agreement through subsidiaries with Avenue Controle Cayman Ltd and other shareholders.
To reach a controlling position of 50.1%, it will pay a sum that has not yet been set two years after the first tranche’s completion for an additional 15.1% stake.
Five years following the closing of the first portion of the transaction, Itau will also be entitled to activate a call option for the outstanding equity holding owned by Avenue stockholders. According to Itau, the brokerage, formerly known as Avenue Holding Cayman Ltd, holds a US digital securities broker, has more than 229,000 active customers and has 6.4 billion reais in its custody.
Itau director Carlos Constantini stated during a press conference call that the bank does not anticipate obstacles in getting the merger approved by regulators.
Management operations to remain independent.
Management and operations would continue to be kept apart, the firms declared. Roberto Lee, founder, and CEO of Avenue, doesn’t really anticipate any leadership changes at the broker.
In a note to clients, BTG Pactual analyst Eduardo Rosman stated that the acquisition somewhat brings to mind the 2017 agreement with XP (XP.O). However, Itau did not receive regulatory approval to acquire complete control of XP.
The analyst pointed out that although the purchase represented only 0.6 percent of Itau’s market capitalization, it “shows Itau is in assault mode, which we like.”
It is vital to note that any potential deal will need regulatory approval before the companies close it.