Market Cheers Brazil Exchange Marriage

Shares in the Bovespa and the BM&F surged on news of their merger Wednesday. Investors showed enthusiasm for the expected synergies and a strong growth outlook for both entities. “The BM&F has grown at higher rates than similar exchanges in other markets while the Bovespa’s growth has been not only higher than that seen in other countries, but at comparable levels to the growth rates of derivatives exchanges,” says Gilberto Mifano, the Bovespa’s CEO. A new holding company, provisionally called Bolsa Nova, will buy all the shares in both exchanges and issue new ones that will result in a 50-50 ownership. Bovespa holders will also get a cash payout of BRL1.24bn reais to adjust for the different shares outstanding in each company. Itau estimates goodwill of BRL16.4bn, which can be amortized over 6 years. The deal still needs to be approved by the CVM, the Central Bank, Brazil’s antitrust regulator and each side’s board and shareholders. A shareholder vote is expected for the week of April 7, say company officials, with a full conclusion to the voting process taking place by the end of April. A share swap, however, will only be done once a union is agreed.