BTG Stake Sale Imminent

BTG Pactual is likely to close a 15% stake sale to J. Christopher Flowers, Government of Singapore Investment Corp (GIC) and other investors relatively soon, according to a person familiar with the matter. However, others have expressed surprise at the price, $1.5bn, which has been reported in the press. But the person familiar with the matter describes valuation as among the more reasonable that had been suggested. Flowers and GIC have been reviewing an investment in the Brazilian bank for months. The fact that a deal has not been reached yet indicates a fundamental disconnect between the two sides, such as valuation of the stake, a banker away from the deal says. Stories regarding a potential sale of the stake to GIC have circulated since at least October, at which point reports had pegged the value of the stake at $2.4bn. Even at $1.5bn, which had been reported by wire services Tuesday, the deal would imply a valuation of more than 5x book, according to the banker, who says the bank’s current book value is still only around $1.7bn, about the same as when Andre Esteves reacquired the firm from UBS last year for $2.5bn. The banker says that the majority of Pactual’s profits come from its trading business, a fact of which Flowers is well aware. The financial investor is unlikely to pay such a high premium to book value for profits for a business that can fall at the drop of a hat, the banker says. BTG is also said to be insisting on direct negotiations with potential investors, refusing to open its books even to advisors that worked on its now defunct IPO.