Esteves Claws Back Pactual

Cash-strapped UBS has sold its Brazil operations to BTG, a boutique run by Andre Esteves, who sold the same unit to the Swiss bank in 2006. The $2.475bn purchase of UBS Banco Pactual will be paid for in cash and the assumption of liabilities, including a deferred compensation package. In 2006, former Pactual managing partner Esteves sold his shop to UBS for $1.0bn cash and up to $1.6bn in compensation deferred to 2011 – subject to performance conditions which apparently were met – and rose to become the Swiss bank’s global head of fixed income. UBS also retained $500m in shares for Pactual and UBS employees, payable beginning on the fifth anniversary of closing. It estimated the present value of the deal at $2.5bn at the time, and UBS expects this week’s sale to result in a small loss. BTG will apparently assume the compensation liabilities as part of the transaction, but it declines to comment on the specifics of the financing. A Sao Paulo-based banker at a rival shop says UBS may be providing financing to BTG to cover the $1bn cash portion. The deal was negotiated privately, with no external advisors. Neither side would comment on how long they had been discussing a deal, but rumors have been circulating for months about former Pactual partners looking to separate from UBS. “This deal represents a major step forward in the development of an investment banking strategy by BTG and will contribute significantly towards our building a solid platform for BTG’s international expansion,” says Esteves. The new entity, BTG Pactual, will consist of an investment bank in Brazil and asset managers in London and New York. UBS has a stake in BTG, which it will apparently retain, along with distribution and prime brokerage agreements. “Following completion of the transition, they will continue their established broad commercial partnership,” says BTG. BTG Pactual says it will continue to look for additional opportunities to expand its operations both abroad and in Brazil. At the