BTG Pactual Raises $1.6B for Brazil Buyouts

SAO PAULO (Reuters) – BTG Pactual, Brazil’s biggest independent securities firm, raised $1.6 billion for a private equity fund as it expands investment in nonfinancial industries, BTG’s merchant banking chief told Reuters.

More than half the capital of the BTG Pactual Brazil Investment I fund comes from investors in the United States, Europe, Asia and Latin America, BTG Pactual partner Carlos Fonseca said in a phone interview.

BTG will chip in $500 million of its own capital and the bank’s partners and employees will invest another $200 million, he added.

The fund begins life as Brazil’s first cycle of massive private equity investments mature and new buyouts are under analysis. After holding and managing their assets for several years, rival private equity groups are now using the stock market to sell stakes and cash out.

The fund will use “a strategy flexible enough to allow us to generate the maximum returns possible without falling hostage to a specific activity or sector,” Fonseca said.

The $1.6 billion raised by BTG Pactual Brazil Investment I is the third-largest private-equity fund-raising effort ever in Latin America. Only Southern Cross’ $1.7 billion vehicle, created in October, and Advent International’s $1.65 billion fund-raising in April are bigger, according to Thomson Reuters data.

The fund’s merchant-banking parent BTG Pactual is already buying stakes in Brazilian enterprises. Last year the bank bought a minority stake in Mitsubishi Motors do Brasil, or MMCB, and a majority stake in parking-garage operator Estapar.

BTG’s move into private equity is a bet that Brazil’s consumer and investment boom — an expansion that has brought millions of formerly poor Brazilians into the middle class — will continue.

So far its bets have taken advantage of Brazil’s strongest back-to-back economic expansion in a generation.

Two companies had already been added to the BTG Pactual I fund’s portfolio: oil services company Brasbunker and Brazil Pharma, the BTG Pactual-controlled drugstore chain. Last week Brazil Pharma raised $293 million in an IPO.

“We will be more deal-oriented than sector-oriented,” Fonseca added. “The real goal is to capture as much growth potential as we can in the Brazilian economy.”

The fund is now at the center of one of BTG Pactual’s most aggressive investment banking deals yet, the proposed merger of Brazil’s Pao de Acucar retail chain with the Brazilian operations of France’s Carrefour.

It set aside 300 million euros ($426 million) to help finance the creation of Nova Pao de Acucar, the company that will hold the merged Pao de Acucar-Carrefour assets.

Grupo Pao de Acucar and rival Carrefour of France announced the merger plans earlier Tuesday. The deal will create a Brazilian retailing giant with annual sales of $41 billion and make it the largest private sector employer in Brazil, the world’s eighth-largest economy.

In addition to BTG Pactual, Brazil’s state development bank BNDES expects to help finance the merger.

The plan was well received by investors. Pao de Acucar nonvoting preferred stock stock surged as much as 11 percent on Tuesday in Sao Paulo — the biggest intraday surge since at least Dec. 4, 2009.

“We believe this is a deal that brings a lot of value to the shareholders involved, as well as consumers,” Fonseca said.

To raise capital for the new fund, BTG Pactual dispensed with the use of placement agents, opting instead to contact potential investors directly, Fonseca said.

Placement agents are firms or investors that handle direct fund-raising activities so bankers can focus mainly on management issues.

BTG Pactual’s fund-raising effort was reported earlier by local newspaper Valor Economico.

(Reporting by Guillermo Parra-Bernal; Editing by John Wallace, Lisa Von Ahn, Jeb Blount and Phil Berlowitz)