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| BTG Pactual | |
| Date: | April 23 |
| Size | R$3.66 billion |
| Structure | IPO |
| Bookrunners | BTG was global coordinator, and Banco do Brasil, Bradesco BBI, Citi, Goldman Sachs and JPMorgan were joint bookrunners. Deutsche Bank, Morgan Stanley and UBS were lead managers |
| return to the Latin America Deals of the Year index | |
The region’s equity markets had a mixed year. In Brazil, the region’s largest market, the equity market had a terrible time, especially for IPOs. Issuance was at its lowest for a decade. Deals launched and were pulled, and those that made it to market were priced well below the range. Amid this weakness stood BTG Pactual. BTG is a bank in hurry, and its rapid growth necessitated an injection of capital and a change in its ownership structure to enable its business plan to maintain its momentum. Rather than wait, it launched amid bad market conditions – the two smaller deals either side of BTG Pactual’s IPO failed to price in its range. The bank’s confidence in its reputation, its deal-pricing discipline and its innovative ownership structure that aligns external shareholders and the selling partnership enabled the bank to price a large deal amid the carnage and move on.
According to the bank’s partner and CFO, Marcelo Kalim, there was never any internal discussion about whether or not to postpone the IPO because of the poor market conditions. “We were in the middle of a very high-growth plan, and we saw that this [level of growth] would continue for a time so we decided to raise more capital. After [that decision was made] we set the price [in January] and that was exactly the price range when we put things in motion.”
Roberto Sallouti, partner and COO of BTG Pactual, adds: “We were always confident in our business model; the most challenging part of the IPO was to tell our story, as we see it, to investors. Once we got that point across to investors, the valuation was just a consequence of that.”
Despite poor conditions, the bank priced in the middle of its range – a R$3.265 billion ($1.6 billion) deal that valued the bank at $14.5 billion – despite being able to price higher: “We are partners with the market and we understand the spirit of partnership and it has to be a good deal for both sides, otherwise it’s just a one-shot deal, and a public company will be doing capital markets transactions throughout its life,” says Kalim. The share price fell shortly after the IPO along with the rest of the market amid turbulence from abroad but is (as Euromoney went to press) nearly 15% above the launch price. As always, BTG’s discipline in pricing and its emphasis on enabling investors to profit are recurring themes in all of this year’s deals of the year awards. BTG was global coordinator on its own IPO, with Banco do Brasil, Bradesco BBI, Citi, Goldman Sachs and JPMorgan joint bookrunners. Deutsche Bank, Morgan Stanley and UBS were lead managers. BTG Pactual carried out an extensive 15-day global roadshow with four different teams, conducting over 165 one-to-one meetings, many conference calls and 19 group events.
Continuing this theme of partnership, Kalim says the decision to exclude partners’ shares from the listed vehicle, but rather to place them in a holding company that is 100% owned by the partners, was important to the BTG story for investors. If partners wish to leave the bank, they cannot simply sell their shares on the open market. They have to sell their shares back to the partnership at book value; this will then reassign them to existing partners at book value. “That decision gave investors the confidence that we would be able to sustain those types of performance through the years. So that was extremely important, not just for investors of course but for ourselves. We decided that it was more important to perpetuate the company – the way we see it today – than to allow one generation of partners to cash in on an event. It sends a strong message that the interest of the partners and the investors will always be aligned with investors, and that is to achieve high return on equity.”
