Santander launches 4.7 billion euro Brazil buyout as Europe rebounds

Tue Apr 29, 2014 7:14am EDT
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By Sarah White and Jesús Aguado

MADRID (Reuters) - Spanish bank Santander (SAN.MC: Quote) launched a buyout offer for the remaining 25 percent of its Brazilian unit, cementing its grip on one of its top profit drivers in a deal worth up to 4.7 billion euros ($6.5 billion).

The transaction, which the euro zone's biggest bank will pay for in newly-issued shares, marks an exception to its strategy of recent years of floating foreign divisions whenever possible to bring in minority shareholders.

It also reflects Santander's confidence in its finances as its first quarter profits rose 8 percent ahead of Europe's toughest banking stress tests yet, which the region hopes will help it draw a line under the financial crisis.

Chief Executive Javier Marin told analysts the Brazilian buyout would not change its approach to other listed divisions, adding a long-mooted public offering of its UK unit would still take place, in the "mid-term."

The bank said the Brazilian offer signaled its long-term trust in the country's prospects, after slowing economic growth dampened earnings last year and pushed bad debts up even as the business remained one of the biggest contributors to net income.

It is also financially attractive for the parent company.

Santander is offering stakeholders a 20 percent premium on the Brazilian unit's shares, but these have lost nearly half their value since they were listed at 23.5 reals ($10.5) in October 2009. They closed on Monday at 12.74 reals.

"It sends a confident message about the management outlook on Brazil and confirms Santander's dealmaking credentials," Macquarie banking analyst Benjie Creelan-Sandford said in a note to clients.   Continued...

The logo of Spanish bank Santander is seen outside a building in Madrid October 27, 2011. REUTERS/Andrea Comas