BTG Upsizes IPO

BTG Pactual has priced a BRL3.66bn ($1.95bn) IPO, pushing on size, but not on price. With demand of more than 3x, the Brazilian bank used 75% of an overallotment option, while keeping the price in the middle of the range. Though sure to be one of the standouts in LatAm this year, it is not clear that the transaction is seen having a reviving affect on the country’s new issuance prospects going forward. “With demand of 3x, they could have priced at the top. But they want to see a sustainable performance in the short-term,” says a Rio de Janeiro-based asset manager. Investors also report the bank’s price range coming below what it had discussed in previous investor meetings. “It is definitely expensive, but there is scarcity value here,” says a New York-based equity investor, noting the lack of comparable financial institutions with the composition of BTG, particularly in the emerging markets. This made the deal difficult to value accurately, with most estimating around 2.5x book value at the middle of the price range, which compares with levels around 2x for other large Brazilian banks. The sale is seen implying a $14bn-$15bn total value for the bank. BTG priced 93.6m primary and 23.4m secondary units at BRL31.25 each, according to the CVM, versus a BRL28.75-BRL33.75 range. The total includes a 15% greenshoe and about 75% of an 18m share hot issue option. The deal was sold 40% to US investors, 40% to Brazilians, 10% to LatAm ex-Brazil, and 10% to the rest of the world, according to a source familiar with the transaction. The units each consist of one preferred and one ordinary share in Banco BTG Pactual, and one common and one non-voting common share in the BTG Pactual Participations offshore entity. The secondary shares were sold by 5 investment vehicles representing the holdings of investment firm JC Flowers and the Rothschild, Agnelli and Motta families. Proceeds will go towards BTG’s expansion. BTG itself was global coordinator, with Bradesco, JPMorgan, Gold