Brazil's BM&FBovespa buys Cetip, creates Latin America's largest bourse

A woman takes a picture of an electronic display board at Brazil's BM&FBovespa stock exchange in Sao Paulo October 7, 2013. REUTERS/Nacho Doce

SAO PAULO (Reuters) - BM&FBovespa SA, Latin America’s largest financial bourse, took over rival Cetip SA Mercados Organizados in a transaction valued at almost 12 billion reais ($3.3 billion), creating a giant with growing presence in regional financial markets spanning from Mexico to Chile.

Under terms of a revamped, unsolicited offer unveiled on Friday, BM&FBovespa BVMF3.SA will pay shareholders of Cetip about 30.75 reais in cash and the equivalent of 0.8991 share in BM&FBovespa, according to a joint statement. Cetip shareholders will own about 11.8 percent of the combined company, which could have about 40 billion reais in market value.

Reuters reported on Wednesday, citing a source, that Cetip CTIP3.SA had agreed on terms of the sweetened offer, and were expected to give their blessing to the deal within 48 hours. BM&FBovespa's prior binding bid that was rejected early in March offered 41 reais per share of Cetip.

The Cetip takeover will make BM&FBovespa the dominant exchange in Brazil, controlling depositary and clearing activities for all types of financial assets and sourcing investors with proprietary market data. Cetip is Latin America’s largest depositary of financial securities with a vast over-the-counter, fixed-income derivatives operation.

In recent months, BM&FBovespa has bought small stakes in Mexican and Chilean counterparts, broadening the scope of the products and services it offers in Brazil’s more sophisticated markets.

“The management of both companies emphasize that this combination of talents and strengths will present an unparalleled event in Brazil’s financial and capital markets from the creation of a top-class market structure,” the statement said.

The negotiations followed years of speculation that BM&FBovespa could pursue an unsolicited takeover of Cetip to grow in registration and custody of fixed-income and credit instruments, segments in which the bourse failed to win market share.

The deal could be reversed should regulators failed to approve the combination or shareholders refused to pass it within the next 18 months, the statement said. The estimated value per Cetip share would be around 45 reais, based on BM&FBovespa’s Friday closing price, according to Thomson Reuters calculations.

Reporting by Guillermo Parra-Bernal; Editing by Dan Grebler, Bernard Orr