BTG Pactuals acquisition of Colombian brokerage Bolsa y Renta takes the Brazilian investment bank one step closer to fulfilling its Latin American strategy. According to Persio Arida, partner at BTG Pactual and chairman of the asset management division of the bank, the banks next target will be in Mexico City: "Our next country is going to be Mexico. We are still discussing between ourselves how best to approach the Mexican market there are a number of alternatives. We might decide shortly... but clearly Mexico is the next target, not necessarily in terms of acquisition but we definitely want to have a presence in Mexico."
Aridas openness about the possibility of an acquisition contradicts the stated view of Roberto Sallouti, BTGs chief operating officer, whom Bloomberg reported as saying about the Bolsa y Renta agreement: "This is the last acquisition we will do in Latin America, the rest will be organic growth. We are not planning to buy any other company in Mexico or Latin America."
However, it does appear clear that after Mexico, the banks network will be complete, at least in the medium term. Arida says: "All the other countries [in Latin America] are not being contemplated for now."
Arida declines to comment on speculation that BTG had been in talks with Corredores Asociados, the independent Colombian firm with the most active independent investment banking division. Bolsa y Renta began offering investment banking services only six months ago; it has had some early successes, winning four M&A mandates. It is also actively building its ECM business. Although its brokerage distribution capability would have been key to attracting the Colombian firm to BTG, it also has an asset management operation, with assets under management of $2.7 billion, and is one of the leaders in the fast-growing wealth management segment.
Arida also declined to comment on how BTG had arrived at the $51.9 million valuation of Bolsa y Renta. The deal is subject to regulatory approval as is BTGs acquisition of Chilean investment bank Celfin but Arida says the plan will be for Bolsa y Renta to merge into a single office with Celfins Colombian operations. Bolsa y Rentas key shareholders and executives will be tied to the bank for four years as part of a talent retention agreement.
The demand for investment banking in Colombia is expected to grow rapidly in coming years: "Colombia is a key market," says Arida. "Its a very dynamic country that is in a stage of its capital markets development that reminds us very strongly of Brazils recent history. The potential for capital market transactions is very substantial. The long-term sustainable growth opportunity looks to us better than any other country in Latin America, including Brazil. As the domestic market picks up I would imagine the listing of companies in Bogotá will increase significantly. FDI is also picking up strongly in Colombia, and thats not only for the traditional mining sector. Agriculture is also a strong area of FDI and we are seeing inward investment in areas that we would not expect before, such as real estate. FDI will be an important driver of our business in Colombia."
Bolsa y Rentas co-head of investment banking, Jorge Tabares, speaking to Euromoney shortly before the announcement of the BTG acquisition, echoes this. "Colombia is growing fast and I see us doing a lot of capital markets transactions in about five or six years," he says. "We are where Mexico, Chile or even Brazil were 10 or 15 years ago, and look what happened in Brazil in 2007 there were 56 IPOs more than one a week. Were not going to reach that level of activity soon but ECM is definitely going to improve. And it wont take us 10 to 15 years to catch up because they have shown us the path."
Tabares also says that access to Peru and Chile was a strategic necessity for Bolsa y Renta. "In Colombia everyone loves the Mila idea [of integrating the stock markets of Chile, Peru and Colombia]," he says. "This will definitely help the liquidity of the markets. If we have a market with Chile and Peru and maybe Mexico then instead of doing deals for $200 million to $300 million we could do deals of $500 million to $1 billion, but it is not easy for us to go to Peru and sell and distribute. We need to have local capabilities."
Arida says the firm has ruled out an acquisition in Peru. "We already have a base in Peru because of Celfin. Celfin had a small presence in Colombia, but has a good market presence in Peru and we are perfectly happy with our platform in Peru. Obviously we are open to opportunities that might appear, but thats true for business in Brazil as well."
BTGs pan-Andean capability follows the recent announcement of Credicorps acquisition of banks in Chile and Colombia to add to its local Peruvian bank. Does Arida think that these recent market moves will increase pressure on BTGs domestic investment banking rival, Itaú BBA, which has announced it will pursue an organic growth strategy in Colombia?
"Itaú is a different [type of] bank its a commercial bank, and so its hard to make a parallel between the two strategies apart from both of us wanting to be strong in Colombia," he says. But BTG is building balance sheet in Brazil to compete with Itaú and "we will build balance sheet in these new markets as well".