General Atlantic in talks on a deal with Brazil’s online lender Geru: Reuters

SAO PAULO (Reuters) – U.S. investment firm General Atlantic is in talks to buy a minority stake in closely held Brazilian online lending startup Geru Tecnologia e Serviços SA, according to two sources with knowledge of the matter.

Other investors may join General Atlantic, the sources said, adding that Geru’s partners have spent the last few weeks visiting funds in San Francisco and New York to raise about $50 million.

Former General Atlantic advisor for Brazil Marcelo Kayath, now a partner at Geru, is leading the consumer lender’s efforts to find fresh funds.

The proceeds will be used to fund loans and technology projects, one source said, asking not to be identified because discussions are still private.

The acquisition of a stake in Geru would follow other similar investments by General Atlantic in Brazilian financial companies challenging the country’s six dominant banks, which together control 80 percent of assets in its financial system.

In 2012, General Atlantic acquired a stake in online brokerage XP Investimentos SA, which it partially sold to Itaú Unibanco Holding SA (ITUB4.SA) in a $1.89 billion deal last year.

Geru charges consumers average interest rates between 36.1 percent and 98.8 percent annually, according to its website, stratospheric by U.S. and European standards but much lower than conventional Brazilian banks, whose rates average 126 percent annually, according to central bank data.

In March, Geru introduced payroll loans, under which employers discount installments from pay checks, in a partnership with French bank BNP Paribas’s (BNPP.PA) Cetelem consumer credit unit.

Geru charges annual rates of between 25.8 and 29.9 percent on such loans.
As Geru has no deposits, it funds itself by issuing domestic bonds to raise money and lend to consumers.