Brazil's second largest bank Itaú (NYSE: ITU) will purchase rival Unibanco (NYSE: UBB) to form the largest private sector bank in Latin America, the banks announced in joint statements.
After negotiations of nearly 15 months, Banco Itaú Holding will become Itaú Unibanco Holding under the deal, the statements said.
Every 1.1797 ordinary shares of Unibanco and Unibanco Holding will be converted to one ordinary share of the new holding company, while 3.4782 preferred shares will become one preferred share.
Itaú Unibanco Holding will issue more than 1.12bn common and preferred shares, or 27.4% of its total shares, to complete the transaction, the statements said.
NEW CONTROL
Pedro Moreira Salles, CEO of Unibanco and member of the Moreira Salles family, which holds 32.9% of that bank currently, will take on the chairmanship of the board of the merged Itaú Unibanco Holding, while Roberto Egydio Setubal, the current CEO of Itaú, will be its CEO.
The controlling groups of the two banks will come away with 51% of the ordinary shares in the new holding company and 26% of its capital, the statements said. Itaú parent company Itaúsa will hold an additional 36% of common stock and 18% of the total shares.
Bank of America (NYSE: BAC) will have 2.5% of the ordinary shares and 5.4% of the total capital, while the remaining 50.6% of the capital will be in free float.
NEW SIZE
The newly merged bank will start with assets of 575bn reais (US$267bn) and a loan book of 225bn reais, based on figures as of end-September.
This would also put it ahead of current Brazilian and Latin American leader, Banco do Brasil (BB), which had 403bn reais in total assets and 190bn reais in loans as of end-June. BB's Q3 results are due out on November 13.
"Sometimes it's like that: that's life," finance minister Guido Mantega said at a press conference. "[BB] will also have its chance to catch up and rebuild itself."
The federally controlled bank is taking on an important role in keeping liquidity flowing in Brazil, he said. The government has offered BB financing and additional powers, most notably through MP 443, which gave the bank general authorization to buy assets in financial companies.
"Whether [BB] is first, second or third [in market share] doesn't have any relevance," Mantega said. "But I do guarantee that [BB] will continue to grow."
Brazil's largest private sector bank today, Bradesco (NYSE: BBD), had 423bn reais in assets and 197bn reais in loans at end-September.
The deal is still subject to approval by authorities, including central bank BCB, after shareholders of the companies vote to proceed in meetings to be held from November 24-December 5.
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