UPDATE 4-Insider trading fine casts cloud over BTG Pactual IPO

Mon Apr 16, 2012 7:19pm EDT

* Italy market regulator fines Esteves 350,000 euros

* Fine lands shortly before BTG Pactual's planned listing

* BTG Pactual says ruling will not affect activities

* Bank plans to give investors five days to reconsider bids

By Silvia Aloisi and Steve Slater

April 16 (Reuters) - André Esteves, the billionaire boss of Brazil's BTG Pactual, has been fined 350,000 euros ($457,900) by Italy's financial regulator for insider trading, just 10 days before his investment bank's looming stock market listing.

BTG Pactual said its activities would be unaffected by the ruling against Esteves, who owns 24 percent of the Brazilian bank, making him one of Brazil's richest executives. But it will force the bank to amend its prospectus, give investors the option of reconsidering bids for BTG shares, and puts a cloud over one of this year's highest profile bank deals.

According to the Italian market watchdog Consob, Esteves made use of privileged information about a planned joint venture involving Italian meat company Cremonini when he bought Cremonini shares in November 2007.

In a statement, BTG Pactual said Esteves believed the allegations had no merit and was determined to appeal the decision. The firm had said in its prospectus this month the outcome of the case should have no impact on its upcoming public share listing.

Late Monday, a source familiar with the matter told Reuters that BTG, in light of the fine and allegations by the Italian regulator, will give investors five business days to reconsider their bids for BTG shares. BTG declined to comment.

Consob said Esteves knew members of the family controlling Cremonini's joint venture partner JBS, a major Brazilian beef producer and a customer of Banco Pactual, a prior incarnation of the investment bank.

The trades were carried out on Esteves's personal account at a time when he was a senior banker at Swiss bank UBS AG which had acquired Banco Pactual before Esteves and partners bought the Brazilian bank back in 2009.

The regulator also barred Esteves from holding senior corporate and board positions in Italy for six months. In February it had ordered the seizure of 4.2 million euros of his assets.

ONGOING INVESTIGATION

BTG Pactual and some of its larger investors could raise up to 4.1 billion reais ($2.2 billion) in the bank's initial public offering (IPO). The shares should begin trading on Sao Paulo's Bovespa stock exchange on April 26.

The prospectus for the share sale, released on April 3, said Esteves was the subject of "an ongoing civil, non-criminal investigation in Europe in connection with certain trades in the securities of a European market issuer made by him in his personal capacity in 2007."

"Our controlling shareholder believes that the allegations are without merit, and currently intends to appeal a finding (if any such finding occurs) against him in such matter," the prospectus also said.

Consob said it notified Esteves of its accusations in November 2010. It said Esteves denied the allegations.

Calling Esteves's explanations "incoherent", Consob said Esteves started buying Cremonini's shares the day after a letter of intent regarding the joint venture project was given to Cremonini. The stock purchases were carried out over 10 days.

JBS bought half of a Cremonini unit in December 2007 for 225 million euros. The joint venture ended last year after years of wrangling over the partnership.

Esteves, 43, rose through the ranks at Banco Pactual before helping sell it to UBS in 2006 by about $3.1 billion. Shortly after quitting UBS, Esteves founded BTG and teamed up with some partners to buy Pactual back from Swiss lender for $2.5 billion in 2009.

BTG Pactual and Esteves himself have become symbols of Brazil's growing economic might, competing head to head with global investment banks in a region with bustling capital markets and surging demand for wealth management services.

He has a net worth of about $3 billion and is Brazil's 13th richest individual, according to Forbes magazine's rich list.

The IPO would be the first by an investment bank based in Brazil, and will raise the bank's profile and that of Esteves globally. Based on an acquisition it made earlier in the year, BTG Pactual is worth $14.8 billion.

The prospectus said regardless of the outcome of the investigation, the bank did not believe there would be an adverse effect on BTG Pactual, including on Esteves's capacity to serve in his present role.

UBS declined to comment on the case.

Esteves, a mathematician who started as a computer technician at Banco Pactual in 1989 at age 21, became a managing partner in 2002. After the UBS takeover, he worked in London and was appointed global head of UBS's fixed income, currencies and commodities group in October 2007.

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