Itau Sanguine on BAML Exit

The exit of Bank of America Merrill Lynch (BAML) from its stake in Itau Unibanco will make “no difference” to the Brazilian bank’s strategy, according to its CEO. “We didn’t really have the opportunity to develop a great relationship, the time was too short in order to become really a strategic partner,” Itau CEO Roberto Setubal tells LatinFinance. BAML acquired the holding in May 2006 when Itau swapped $2.85bn in equity for BankBoston’s Brazil, Chile and Uruguay assets. Setubal says that some operations were discussed while BAML was a shareholder, but the period was dominated by the financial crisis. BAML hopes to get over $4bn from the sale, which will be used to repay TARP borrowing. “It was a good investment for them,” says Setubal. In the share sell scheduled for next Tuesday, BAML will sell all of its 188.4m Itau preferred shares through a 144a/RegS secondary ADS offering, representing 8.4% of the Brazilian bank’s preferred shares and 4.16% of total capital, Itau says. If done at Tuesday’s close of $18.19, it would raise $3.43bn. Itau’s holding company is itself set to privately buy 56.5m common shares, representing 1.2% of total capital, to boost its stake to 36.68%. The purchase price will correspond to the sale price of 1. “It’s a good opportunity for investors who want to be a shareholder of Itau to acquire a large portion of shares,” says Setubal. Bankers on the deal expect a wide distribution in the market, though current secondary volatility is viewed as unhelpful. Itau preferred shares slumped 5.1% to close at BRL33.20 Wednesday, underperforming the Bovespa, which dropped 1.9%. BAML and Itau will manage the secondary sale. To fund Itau’s purchase, the bank says its board has approved the sale of BRL1.4bn in new debentures by the holdco on the Brazilian market. After the sale, BAML will lose its seat on the Itau board. As part of BAML’s borrowing from the US government, it pledged to sell assets to produce a net gain of $3bn by June 30.