DEALTALK-Itaú's Mexico deal showcases ability to win mandates beyond Brazil

Thu Jun 26, 2014 11:05am EDT

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By Guillermo Parra-Bernal

SAO PAULO, June 26 (Reuters) - Itaú BBA's heavily oversubscribed underwriting deal in Mexico demonstrates the growing ability of the Brazilian investment bank to compete with deep-pocketed rivals and to win business outside its home base.

Bankers at Itaú BBA were responsible for the international portion of Mexican restaurant operator Alsea SAB de CV's $500 million follow-on offering, which was completed Tuesday. Fifty-two percent of the proceeds came from investors outside Mexico that Itaú helped bring in for the deal.

U.S. investors snapped up 50 percent of the Itaú BBA-handled offering, with Brazilians and Chileans taking one-third, Facundo Vázquez, Itaú BBA's head of Latin America equity capital markets, said in an interview. The rest was purchased by investors in Europe and Asia.

Itaú BBA is also growing in Chile, Colombia and Peru as capital markets activity in Brazil appears headed for its weakest year in at least a decade. Analysts expect Itaú BBA's investment-banking deals to increase further once it wins regulatory approval to open a broker-dealer in Mexico.

"In all my experience in Latin America, I had never seen such massive interest in a Mexican deal by Brazilian and Chilean investors," Vázquez said.

For two years, Itaú BBA nurtured its relationship with Alsea by initiating research coverage and hiring dealmakers close to the company. Both factors helped Itaú BBA be placed as a bookrunner for the offering alongside HSBC Holdings Plc , Citigroup Inc and Banco Bilbao Vizcaya Argentaria SA, which had lent Alsea money for an acquisition.

Demand for the overseas portion of the offering topped about $1.5 billion, while only about $260 million was available. Alsea, which runs Starbucks coffee shops and Domino's Pizza and Burger King restaurants in Mexico, Argentina, Chile and Colombia, sold the shares at 45.75 Mexican pesos each, only 0.8 percent off its Tuesday closing price.

REGIONAL EXPANSION

Parent lender Itaú Unibanco Holding SA is expanding in Latin America to help Itaú BBA's Brazilian clients seek new destinations for their money and boost credit and specialized financial services for companies in the region. A pullback from major global lenders from the region is helping Itaú BBA in its push.

To grow in Latin America, Itaú BBA and rival Brazilian banks are spending heavily to groom new talent, enhance client relations abroad and beef up their ability to place new issues to markets. Grupo BTG Pactual SA is also pushing into Mexico, Colombia and Chile.

BTG Pactual is atop Latin America equity underwriting rankings after advising on seven deals this year, and Itaú BBA ranked sixth after working on three, Thomson Reuters data showed.

Itaú BBA expects to have 50 employees in Mexico once its broker-dealer is approved. Last year, it hired Mexico's first national housing czar, Alberto Mulas, to lead the unit. (Editing by Todd Benson and Lisa Von Ahn)

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