Itau Unibanco has agreed to buy a 49.9% stake in the Brazilian brokerage firm XP Holdings for BRL6.3bn ($2.01bn), canceling XP’s plans for an IPO.
“I can confirm that the IPO will not take place in the near future,” Itau Unibanco CEO Candido Bracher said in a conference call on Friday.
“It is not going to happen,” an equity capital markets banker in New York said about a potential equity offering. “It is a shame. This was going to be big.”
Itau’s announcement of the acquisition came days after XP filed for an IPO that could have been worth between $1.5bn and $2bn, three ECM sources said.
XP had hired JPMorgan, Banco do Brasil, Bank of America Merrill Lynch, Bradesco, BTG Pactual, Goldman Sachs, Morgan Stanley and Safra to lead a public share offering.
But Itau said on Friday that it will pay BRL5.7bn to the private equity firm General Atlantic and the Dyna III fund as part of the acquisition and also inject BRL600m in capital in XP.
“[XP] must be happy with the valuation from Itau. Otherwise, it would not have done this acquisition so close to its IPO plans,” said a an ECM banker in Sao Paulo.
The bank will pay off the cash-only acquisition in roughly seven to 10 years, CFO Caio Ibrahim David said in the conference call. “We are still working on the numbers,” he added.
Itau will hold 30.1% of voting shares and 69.8% of preferred shares after the transaction closes, but XP’s existing management team will remain in control. The bank added it will be able to appoint two members to the XP board.
XP Controle, a subsidiary of XP Holdings, will reduce its stake in the brokerage firm to 30.1% from 50.5%, while General Atlantic will decrease its share to 20% from 49.5%, Itau said in a presentation.
The bank can build its stake in XP to 62.4% in 2020 and then increase its total share to 74.9% in 2022, eventually owning 49.9% of common shares and 100% of preferred shares.
XP Controle can exercise a put option to sell all remaining shares to Itau Unibanco from 2024. Itau Unibanco will have the right to exercise a call option to buy all of XP Controle’s shares in XP Holdings from 2033.