* BTG Pactual units close 0.6 pct higher in trading debut
* CEO Esteves says IPO a "vote of confidence" in Brazil
* Bank raised $1.96 bln in world's largest IPO this year
* Units look appealing yet still expensive, analysts say
By Guillermo Parra-Bernal
SAO PAULO, April 26 BTG Pactual
units rose on Thursday after completing the world's largest
initial public offering this year, in a sign of investor
confidence in Latin America's leading independent investment
bank and its billionaire founder, André Esteves.
The units closed 0.6 percent higher at 31.45 reais ($16.68)
from the 31.25 reais at BTG Pactual's IPO on Tuesday. The units,
a mix of common and preferred stock of its investment banking
and buyout divisions, had jumped as much as 4.3 percent in
Esteves, speaking at an event at the São Paulo Stock
Exchange to mark BTG Pactual's trading debut, said the success
of Brazil's first investment bank listing is "a vote of
confidence in Brazil's capital markets by the global financial
The $1.96 billion IPO valued BTG at $14.5 billion, making it
Brazil's 16th-biggest listed company. The bank could offer more
shares within the next six to 12 months, bankers told
International Financing Review, a Thomson Reuters publication
specializing in capital markets.
"This is indeed a bet on the Brazil story," said Mohamed
Mourabet, who helps manage about $1 billion in equities at
Victoire Capital in São Paulo. "What might lure investors to
this name is the fact that they have shown the skills and focus
to differentiate themselves from other financial companies."
The offering, which gave investors the chance to buy into a
fast-growing company with aspirations of rivaling global giants
like Goldman Sachs Group Inc, is also the world's biggest
IPO so far this year, according to Edemir Pinto, chief executive
of BM&FBovespa, the owner of Brazil's sole exchange
BTG Pactual's offering was also the nation's largest IPO
since Banco Santander Brasil's $7.5 billion offering
in October 2009. Esteves said the deal would create space for
other IPOs in Brazil and fan foreign interest in local markets.
More than 18.1 million units changed hands in Thursday's
session, with BTG Pactual's brokerage actively propping up the
stock through heavy purchases, traders said. Individuals were
actively selling their holdings to pocket gains as demand from
foreign institutional investors gained traction in the morning.
The rise in BTG Pactual units came on a day in which
Brazil's benchmark Bovespa stock index seesawed for most
of Thursday's session. The index closed 0.7 percent higher.
The deal comes at a time when Brazil's once-hyped IPO market
is struggling as an unpredictable economy and the risk of
overpriced deals scares away investors. Last week, car rental
company Locamerica became the first company to go
public in Brazil since July.
The Locamerica deal priced below the target range, and prior
to that three other attempted IPOs flopped because of market
turmoil. By contrast, investors lined up for the BTG Pactual
sale, hoping to tap into Esteves' success as a dealmaker.
BTG Pactual's successful debut is the first time that a new
Brazilian listing rose in its first trading day since shares of
home appliance retailer Magazine Luiza were floated
on May 2, 2011.
BTG Pactual and Esteves himself have become symbols of
Brazil's growing economic might, competing head to head with
global investment banks in a country with bustling capital
markets and promising growth outlook for the coming years.
"The BTG story will only work out so long as we keep working
to make Brazil a more just country, with a stronger middle
class," Esteves said to thundering applause from his partners
and bankers involved in the deal.
Esteves, a 43-year-old mathematician who started as a
computer technician at Banco Pactual at 21, rose to become
managing partner and sold the bank to UBS AG in 2006
for $3.1 billion. He and some partners bought back Pactual for
$2.5 billion in 2009 and formed BTG Pactual.
At the ceremony in BM&FBovespa's old trading floor in
downtown São Paulo, all BTG Pactual partners and employees
attending were wearing royal blue ties resembling the bank's
BM&FBovespa's Pinto said Esteves "is a visionary, a symbol
of Brazil's new capitalism, a pioneer among a new breed of
Demand for BTG Pactual stock was over three times the amount
of shares on offer, another source told Reuters before the deal
was closed, indicating that investors shrugged off recent
insider trading accusations against Esteves in Italy. Esteves,
who denies the charges, plans to appeal.
The stock is trading at an estimated 2.3 times book value,
according to analysts' estimates collected by Thomson Reuters,
indicating that they are trading at a premium to older, more
diversified banking groups in Brazil.
"The stock looks attractive, and might enjoy another rise in
multiples, but it doesn't mean it's not expensive," said a São
Paulo-based trader who spoke on the condition of anonymity.
That multiple could rise to 2.8 times as BTG Pactual expands
operations across Latin America and sustains return on equity
above the financial industry's average in Brazil, analysts
On average, Latin American banks are trading at 2.3 times
book value, while large Brazilian lenders - a proxy for BTG
Pactual - are valued at 1.8 times, according to data by Raymond
James & Associates.
Esteves said at the event that BTG Pactual could grow into a
"regional champion" among investment banks and asset managers as
competition mounts in Latin America. Regulatory changes planned
for the Brazilian financial industry "are welcome," he added.