Brazil's BTG Pactual buys Swiss wealth firm BSI for $1.7 billion

MILAN Mon Jul 14, 2014 10:45am EDT

A view of Generali headquarters in Rome April 6, 2011. REUTERS/Remo Casilli

A view of Generali headquarters in Rome April 6, 2011.

Credit: Reuters/Remo Casilli

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MILAN (Reuters) - Brazilian investment bank Grupo BTG Pactual (BPAC3.SA) is buying Swiss private bank BSI for a knock-down 1.5 billion Swiss francs ($1.7 billion), extending an overseas push by the Sao Paulo-based lender.

The deal, the second biggest in the bank sector this year, brings to an end a long-running attempt to sell the unit by Italian insurer Generali (GASI.MI).

BTG, controlled by billionaire financier André Esteves, said the Swiss unit would become its global wealth management business, increasing its wealth and asset management assets to more than $200 billion and giving it a big presence in Switzerland, the world's biggest financial offshore market.

It marks the boldest move by BTG to diversify away from Latin America, and Esteves said he planned further international growth in the next five years.

"It's good for the world to have a global investment company like us headquartered in an emerging market. It adds a little bit of colour to the financial arena," Esteves, also chief executive, told reporters on a conference call.

"We are entrepreneurs. We have capital, reputation, motivation and ambition to continue to grow," said Esteves, who has an estimated net worth of $4.2 billion, according to Forbes.

The deal brings to an end Generali's more-than-three year search for a suitable buyer for an asset that had lost appeal in the face of relentless pressure by the United States and other western nations on Swiss banking secrecy.

The sale will lift the insurer's Solvency I ratio, a measure of financial strength, by 9 percentage points to more than 160 percent. That will allow Europe's third-largest insurer to meet a key target of Chief Executive Mario Greco's business plan a year early.

Generali said the sale price could be reduced if BSI is fined by U.S. authorities in relation to a tax amnesty programme, in which American taxpayers can voluntarily declare assets held secretly offshore.

The Italian insurer had hoped to fetch an amount similar to the 1.9 billion francs it paid for the business in 1998 but was forced to lower the price and will suffer a net loss of 100 million euros ($136.4 million) on the disposal.

It had written down the value of its BSI holding by more than 200 million euros earlier this year.

CHANGING LANDSCAPE

BTG Pactual is run as a partnership and was formed in 2009 when Esteves' Bank and Trading Group (BTG) acquired UBS Pactual,

a brokerage with a 30-year history that had been bought by Swiss bank UBS (UBSN.VX) in 2006. In 2012, the business listed on the stock market, where it is valued at about $14 billion.

It has a strong private banking business in Brazil but little beyond its home market. BSI, which was founded in Lugano in 1873, has more than 2,000 staff in 20 locations, including in Singapore and Hong Kong.

BTG has been expanding in Europe and Asia, and the deal will leave it with about half its staff based outside Latin America.

The Swiss private banking industry is going through a period of upheaval after a long-running U.S. tax evasion probe and crackdowns in Germany, France and elsewhere, which have led to the number of Swiss banks shrinking by around a fifth to just under 300 between 2000 and 2012.

Smaller, independent players in particular have been under pressure to sell up or close down, and even majors such as UBS (UBSN.VX) and Credit Suisse (CSGN.VX) have been hit with multi-million dollar fines.

"It is a changing landscape, and banks are moving away from a focus on confidentiality and much more on performance and transparency, and we're going to run the business very much in that vein," said Steve Jacobs, one of BTG's managing partners and head of its international asset management.

"We felt this was the right time and right platform to take advantage of that," Jacobs said, adding the bank could look at more wealth management deals, but probably not for another 18 to 24 months.

With the sale, Generali completes a disposal plan in which it has sold 3.7 billion euros of non-insurance assets in about 18 months, just shy of its 4 billion euros target.

Assets already sold include a minority stake in a Mexican insurer and reinsurance activities in the United States.

Under the terms of the deal, Generali will receive 1.2 billion francs in cash and the equivalent of 300 million francs in Banco BTG Pactual ordinary and preference shares.

The transaction, subject to regulatory approval, is expected to be completed in the first half of 2015.

JP Morgan and Mediobanca assisted Generali as financial advisers on the deal.

(Additional reporting by Gianluca Semeraro, Steve Slater and Katharina Bart; Editing by David Holmes and Jane Baird)

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