BTG Aims High with IPO

BTG Pactual is targeting as much as BRL3.5bn ($1.9bn) in its IPO, which at the high end of its price range would top the market’s previous estimations for the much-anticipated sale. The Brazilian investment bank launched Tuesday ahead of an April 24 pricing seen as a clear test of Brazilian new issuance prospects this year. BTG is betting on strong demand based on interest in the Brazilian and regional growth story and its being the first BRL2bn-plus IPO from Brazil since late 2010. Valuing the shop that is a combination of investment bank, private equity manager, asset manager and other functions continues to be a tricky proposition, as there are few, if any, direct comps available. “The deal should be well received given the size. It’s a quality name that has done a good job of expanding,” says an EM portfolio manager, who sees a valuation at roughly 2.5x-3.0x book. Initial speculation had valuations as high as 3.5x. “This will get a lot of attention, but the question is what am I buying into,” says another EM investor, noting it is difficult to value certain pieces of the bank, such as proprietary trading and asset management. Though investors may see as much as 3.0x, BTG is heard describing the price as implying a 2.2x-2.6x book valuation, against a bucket of comps – including banks, investment banks, and asset managers. The bank plans to sell 72m primary units and 18m secondary units, at BRL28.75-BRL33.75 each, meaning a BRL2.98bn-BRL3.49bn size. The total assumes a 15% greenshoe, made up of 10.8m primary units and 2.7m secondary units. A 20% hot issue is also available. The units each consist of one preferred and one ordinary share in Banco BTG Pactual, and one common and one non-voting common share in the BTG Pactual Participations offshore entity. The IPO will feature a Brazilian portion and an international portion done in Amsterdam. The secondary shares are to be sold by 5 investment vehicles representing the holdings of investment firm JC Flowers and the