EFG in merger talks with BTG Pactual's BSI, sources say

The logo of Swiss private bank BSI is seen at a branch office in Zurich March 31, 2015. REUTERS/Arnd Wiegmann

SAO PAULO/ZURICH (Reuters) - Grupo BTG Pactual SA is in talks to combine its Swiss-based private-banking unit with EFG International AG EFGN.S in a transaction that could be announced as early as next week, two sources with knowledge of the plan said on Friday.

The structure under discussion would leave São Paulo-based BTG Pactual BBTG11.SA with a stake of 20 percent to 30 percent in the combined entity, said the first source, who asked for anonymity since the discussion remains private. Whether EFG incorporates BSI, or vice versa, will be decided based on the most efficient tax structure, the source said.

Both BTG Pactual and EFG confirmed they are in exclusive talks over BSI, adding that no decision had been made yet. Shares in EFG were up 2.4 percent at 6.74 Swiss francs in Zurich at 1146 GMT.

The deal would help BTG Pactual move on with a plan to sell assets, raise cash and restore investor confidence in the wake of the arrest of founder André Esteves last November. Esteves was the architect of BTG Pactual’s purchase of BSI last year, which he said would help the independent investment bank grow beyond Latin America.


BTG Pactual could partly receive payment for BSI in cash, the sources said. Zurich-based EFG EFGN.S and BTG Pactual agreed not to adjust the value of the deal should BSI have to pay a fine related to a scandal at a troubled Malaysian government fund, 1Malaysia Development Bhd, the source said.

A price has yet to be determined, although the first source said BSI could be valued at $1.6 billion prior to any combination.

According to the second source, who was briefed on the matter, EFG is talking to Swiss financial industry watchdog about the impact of a combination, since BSI is the largest employer in the Swiss canton of Ticino.

BTG Pactual and EFG, which is controlled by Greek billionaire Spiros Latsis, have been on exclusive negotiations for about a month, the first source added.

Editing by Guillermo Parra-Bernal and Bernard Orr