Chile's CorpBanca nears sale, sources say; BBVA, Itaú bidding
SAO PAULO/SANTIAGO (Reuters) - Billionaire Alvaro Saieh is close to finalizing a merger for Chile's CorpBanca SA COB.SN, in which he holds a controlling stake, three sources told Reuters on Wednesday, with Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA.MC) and Brazil's Itau Unibanco Holding SA (ITUB4.SA) the frontrunners.
The bidders want to buy a stake that is big enough to allow for control of the bank, said two of the sources, who declined to be identified because the transaction is private. Saieh, who owns about 54 percent of CorpBanca's capital, wants to remain a relevant shareholder in the merged bank.
"There has been no decision in respect of whether the deal will involve shares, cash or both. The only thing that is clear so far is that the formula being discussed is one of co- control" for Saieh, said a third source with direct knowledge of the talks.
Santiago-based CorpBanca, Chile's fourth-largest bank, which also operates in Colombia, said in a securities filing last week that it was considering a merger with a local or foreign bank. Colombia-born Saieh is seeking to raise cash since an accounting error led SMU, the retail company of his CorpGroup conglomerate, to breach debt covenants earlier this year.
Talks could close as early as this week, sources said, adding that talks with Itau, Brazil's biggest bank by market value, and Spanish behemoth BBVA are advanced. The first source said Saieh is in New York and looking to close the deal soon.
The timing of the deal surprised investors, who expected CorpBanca first to finish the integration of two banks it bought in Colombia before attempting a sale. A deal with CorpBanca would allow Itaú, which has for years unsuccessfully tried to buy a retail bank in Chile, become the Andean nation's No. 3 lender, leap-frogging Banco del Estado de Chile SA BAESC.UL and Banco de Credito & Inversiones SA BCI.SN.
Shares in CorpBanca rose 1.9 percent to 6,800 pesos on Wednesday, valuing the company at about 2.29 trillion pesos ($4.29 billion).
Itaú fell about 1 percent in Sao Paulo, about the same drop that BBVA took in Madrid on Wednesday.
CorpBanca, Itaú and BBVA declined to comment on the talks.
While the transaction could be a merger, it might also be an outright sale, or involve the creation of a structure allowing Saieh to remain a relevant shareholder in the combined company, two sources said.
Saieh, who holds a PhD in economics from the University of Chicago, has a history of buying and selling financial assets. He sold a small bank to Banco Santander SA (SAN.MC) in 1996 and pension and retail banking assets in Argentina to BBVA three years later.
However, he has struggled in recent times with his SMU retail unit, which runs Unimarc, one of Chile's largest supermarket chains.
In August, SMU said it uncovered accounting errors in a review of first-quarter earnings, raising its liabilities and leading it to breach debt covenants. Fears of a read-across led CorpBanca shares to hit an all-time low and raised the bank's cost of borrowing, though they have since largely recovered.
"We believe dismantling the financial arm of the group would be detrimental to future access to funding, with the consequent implications to their future investments and therefore value," Claudia Benavente, an analyst with Scotiabank in Santiago, wrote in a client note last month.
TARGETING LATIN AMERICA
BBVA is edging ahead of Itaú in the talks, newspaper Diario Financiero said on Wednesday, citing sources with knowledge of the discussions.
Like CorpBanca, BBVA has significant operations in Colombia. A tie-up between the two would create Colombia's No. 2 lender, which could be the key selling point for the deal, analysts said.
BBVA, Spain's second-largest bank, makes half its revenue in Latin America and strength in its emerging markets has supported its margins at a time when Spanish banks have been recovering from a real estate crash and deep economic crisis.
For Itaú, a purchase would not only open a significant window of opportunity for expanding into retail banking in Chile - a market that Chief Executive Officer Roberto Egydio Setubal has praised repeatedly - but also provide a platform to grow in Colombia.
Itaú is Latin America's largest bank by market value and for years Setubal has sought to buy regional rivals, but always backed off due to high valuations. Itau began its operations in Chile with the purchase of Fleet Boston Corp's local unit in 2006 and later HSBC Holdings Plc's operations in 2011.
"It is well known that Itau has the cash to invest and the intention to continue growing in Chile and Colombia," said Carlos Gomez-Lopez, an analyst with HSBC Securities in New York.
Unnamed Chinese banks have also expressed an interest in CorpBanca, Diario Financiero said.
Talks are already advanced and it is likely too late for a rival bid to emerge, the three sources noted. One source said, however, that there was no strict deadline.
"The objective of CorpBanca is to have the best partner, so if no agreement is reached at this moment, it's very probable that talks could begin with other interested banks," the source said.
($1 = 534 Chilean pesos)
(Additional reporting by Rosalba O'Brien in Santiago and Jesus Aguado in Madrid; Editing by Lisa Von Ahn and Dan Grebler)
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