BTG Valuation Still Unclear as Bank Files IPO

Predicting the valuation of BTG Pactual remains difficult, analysts say, after the bank officially filed its long-expected IPO Thursday. The documents give no details about the size of the deal or number of shares to be sold. The popular market guess has been for a BRL2bn ($1.17bn)sale, with the bank being given a total value of $14bn-$15bn. This would imply a price-to-book valuation of more than 3x, analysts say, well above peers such as Itau and Bradesco. “The bank deserves a premium for its story and what it has accomplished, but 3.5x would be difficult.” says a Rio-based investor. He notes the deal will be a good test for the market and if successful could go a long way to lifting new issuance this year. “It is difficult to make predictions for an investment bank [compared to retail], and the tendency is to work with lower multiples,” says a Sao Paulo-based FIG equity analyst, noting that a good starting point would the 2.0x price-to-book trading levels seen on retail-plus-investment bank competitors. “But that [conservative tendency] may be wrong here. There is a lot of confidence in [CEO] Andre Esteves’ entrepreneurship,” he adds, noting enthusiasm for Banco Panamericano shares during the tag along offer after BTG took over the troubled retail bank. “This is a strong operation with good liquidity,” adds a Rio-based FIG analyst, noting that it will all depend on the markets, which, though the Bovespa is up this year, have been rough on new deals. There will be a domestic sale and an international sale on the Euronext Amsterdam, according to the prospectus. BTG plans to sell units consisting of preferred and ordinary shares, as is common with Brazilian bank IPOs. Adding an additional layer of complexity is that the units will also incorporate shares in Brazilian entity Banco BTG Pactual and Brazilian Depository Receipts for the BTG Pactual Participations offshore entity. The transaction will include primary shares, as well as secondary shares to be sold by the