After two months of discreet talks, Itaú Unibanco closed on Thursday (May, 11th) the purchase of 49.9% of the total capital of XP Investimentos for R$ 6.3 Billion, which includes R$ 600 million in resources that the bank will inject into the company. With the transaction, the country’s largest private bank reserves its space in the process of “de-banking” in progress, in which people are leaving traditional banks for brokerage accounts with banking services. “I believe this transaction will take Itaú and other banks out of the comfort zone, as it will strengthen XP and increase its ability to compete in the investment market,” said Roberto Setubal, co-chairman of Itaú Unibanco’s board of directors.
The Dutch multinational Heineken announced on Monday (13) the purchase of Brazil Kirin, controlled by the Japanese group Kirin, for 664 million euros (R$ 2.2 billion). With the acquisition, Heineken becomes the second largest brewery in Brazil. After the conclusion of the deal, Brasil Kirin will be consolidated with Heineken.The transaction evaluates Brazil Kirin at 1.025 billion euros (R $ 3.3 billion), including debt. Brazil Kirin closed 2016 with a revenue of R $ 3.706 billion, against a revenue of R $ 3.698 billion a year earlier, and an operating loss of R $ 262 million, against R $ 322 million in 2015.
Kirin Brazil has 12 factories and its own distribution network. The company has a particularly strong presence in the North and Northeast, where Heineken has less exposure. The beer portfolio, which includes brands such as Schin, Devassa, Baden Baden and Eisenbahn, has a market share of 9.9%. Brazil Kirin also has a line of soft drinks, with a market share of 2% in the category.
Heineken operates five plants in Brazil and distribution is done by Coca-Cola bottlers. The company said it expects significant cost synergies with the acquisition, with efficiency gains in production, logistics optimization and sales, general and administrative expenses.
Completion of the purchase is subject to the approval of the Administrative Council for Economic Defense (Cade).
The Italian company Luxottica, largest company in the world for glasses, will buy Óticas Carol for € 110 million (R$ 368.6 million). The agreement was signed with the partners of the Brazilian company 3i Group, Neuberger Berman and Siguler Guff & Company, and depends on the approval of the Administrative Council of Economic Defense (Cade) to be concluded. Ronaldo Pereira, president of Óticas Carol, said that the request for approval will be sent to Cade in the coming days. The expectation is to complete the purchase this semester.
The acquisition is the first move by the Italian group since the global acquisition two weeks ago of France’s Essilor International for € 46.3 billion. This operation gives rise to the largest global company of glasses and lenses, with market share of 32% in the world and 28.3% in Brazil, according to Euromonitor International.
The purchase of Óticas Carol in Brazil will lead Luxottica to the leadership in the optical market as well. Óticas Carol has 950 stores in operation in the country and closed 2016 with revenues of R$ 813.7 million, a result 21.4% higher than in 2015. Its market share is 2.3%, according to Euromonitor International .
In a statement, the president of Luxottica, Leonardo Del Vecchio, said the company will verticalize its operation in Brazil with the purchase. Overall, Luxottica has 12 optical networks and a total of 7,400 stores in operation on five continents. From January to September 2016, the company’s retail revenue grew 5.7% to € 3.297 billion and accounted for 81% of total revenue. Total revenue in the period rose 0.2% to € 4.085 billion.
In the Brazilian retail market, Luxottica entered in 2011 with the Sunglass Hut network, which reached 100 stores in the country in 2016, being 73 own units and 27 franchises. The goal was to reach 200 units in five years. “Luxottica has a major retail operation in the international market, but faced difficulties in Brazil to grow in this area, due to the complexity of the sector,” Pereira said.
Óticas Carol president added that with the purchase, the retailer gains a more robust structure to carry out its expansion plan. For 2017, Óticas Carol aims to open 175 franchise stores and reach a revenue of R$ 918 million. Pereira said that this goal can be changed in the coming months, depending on the definitions that Luxottica takes on the network.
Asked about the maintenance of two optical retail chains in the country, Luxottica reported that “Óticas Carol has proved to be efficient and effective in the market” and that “it is too early to discuss the future of Sunglass Hut, since the acquisition still needs Be approved by Cade. ”
The Brazilian optical market is very pulverized, with approximately 26 thousand companies in the country, according to the Brazilian Optical Industry Association (Abióptica). In addition to Óticas Carol, Óculos Diniz is among the leaders, with more than 900 stores, followed by Chilli Beans, with just over 700 units. The other networks have less than 100 stores.
For the president of the Abioptica, Bento Alcoforado, the acquisition will have limited effect in the sector. “Even if Óticas Carol opens another 150 stores this year, it will continue with a very small portion of the market,” said Alcoforado. He considers it possible to see new acquisitions in the sector throughout the year, as the Brazilian economy shows signs of improvement. Last year, the sector shrank 17% in revenues, to R$ 16.9 billion.
The deal between Luxottica and Óticas Carol took about a year. As part of the agreement, the contracts of Ronaldo Pereira and the directors of the retailer were renewed for another three years. Luxottica will continue to provide its frames and lenses to other retail chains in addition to Óticas Carol in the country.
Itaú has agreed to pay R$ 710 million (approximately US$ 220 million) for the retail operations of Citibank in Brazil. The transaction was announced this morning. Citi primarily serves high-income customers and has 315,000 account holders in the country.
In the acquisition, Itaú acquired loan portfolio, credit cards, deposits, asset management, insurance brokerage and the 71 branches that Citi has today in the main regions of the country. That is R$ 35 billion in deposits and assets under management, 1.1 million credit cards issued and a credit portfolio of R$ 6 billion reais. After the acquisition, Itaú Unibanco will have R$ 1.404 trillion in assets.
The acquisition still needs to receive the approval of the Central Bank and CADE (Administrative Council for Economic Defense)
Citibank joins HSBC in retreating from Brazil. HSBC announced at the end of 2015 that it sold its Brazilian operations to Bradesco. In a deal already approved by anti-trust authorities, Bradesco acquired HSBC and brought their assets closer to Itaú, largest private-controlled bank in Brazil, by that metric. HSBC was a lot bigger than Citi in Brazil, but today’s acquisition shows Itaú is not willing to let this largest label go.
Itaú has a 5-star rating from Easy Brazil Investing and continues to be a great way to play the Brazilian economic recovery.
One immediate consequence of the of the restrictions imposed by CADE is that Bradesco is definitely out of the dispute to acquire Citi in brazil, since no new acquisition will be allowed to the bank for 30 months. On top of that, the bank has to lower the portability costs for HSBC customers that do not want to come under Bradesco.
With the acquisition, Bradesco gets closer to the largest private bank in Brazil (Itaú Unibanco). HSBC has around 2 to 3% of the banking system market share and now Bradesco should reach around 17%.
The EPS should have neutral impact for the first year, since the bank does not plan on issuing new stocks to finance the acquisition and the multiples of the acquisition are in line with Bradesco’s itself. The acquiring bank’s expectation is that the transaction starts to generate value a year after its closure.
TOTVS S.A. (BM&FBOVESPA: TOTS3) (“TOTVS”) and BEMATECH S.A. (BM&FBOVESPA: BEMA3) (“Bematech”), in addition to what was informed by the companies on August 20, 2015 and September 03, 2015, hereby jointly announce that, on this date, the decision of CADE’s General Superintendence, approving the merger of Bematech’s shares by Makira II Empreendimentos e Participações S.A. (“Makira II”), and the subsequent merger of Makira II by TOTVS, was published, as detailed in the announcements previously made and in the other documents mentioned thereunder. Once the legal term of 15 (fifteen) daysfor the call-back (avocação) of the decision by CADE’s Court elapses with no objection to that decision, the companies will make a new announcement, with the guidelines regarding the procedures for the satisfaction of the transaction.
TOTVS, one of the largest Brazilian IT companies, will pay R$ 467.4 million (US$ 130 million) in cash and R$ 82.5 million (US$ 24 million) in stock to buy 100% of Bematech, which specializes in automation for retailers. The operation should be voted on at a meeting of shareholders, on September 3. CADE, Brazil’s anti-trust authority has been notified. The deal is being called corporate restructuring. If it was a classic acquisition, a public offering would have to be done, explained the director of investor relations at Totvs, Douglas Furlan. Totvs already operates in retail automation, but focused on a few areas such as large discount retailers and car dealerships, for example. Now, with Bematech, the scope increases for food outside the home, hotels and building materials, among other sectors.
Bradesco has confirmed its favoritism and, in the early hours of Monday, has formalized the acquisition of HSBC’s Brazilian operations, as highlighted by HSBC in its earnings report. The purchase was made for US$ 5.2 billion, or R$ 17.6 billion. The Brazilian central bank was notified last night of the transaction outcome. Thus, the amount to be paid by the national operation of the bank was well above the already rumored, US$ 4 billion. In recent weeks, the estimates for the business ranged between R$ 10 and R$ 12 billion.
Bradesco shares were down up to 3% on the São Paulo stock exchange today on the news.
Brazilian antitrust council, CADE (Administrative Council for Economic Defense), opened an administrative process to investigate alleged cartel consisting of 15 foreign financial institutions in order to manipulate the foreign exchange market. It is the first antitrust case in Brazil for manipulating rates in the financial market.
Some of these banks have been investigated for the same practice in the UK, Switzerland and the United States, in cases that came to light in 2013 and which totaled over US$ 5.8 billion in settlements and fines. The Brazilian investigation started from a leniency agreement signed by a cartel participant with CADE and the federal prosecutors. The bank in question, whose name is kept confidential, requested full immunity after cooperating. The institutions investigated in the Brazilian process are: Standard Investment Bank, Bank Tokyo Mitsubishi UFJ, Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Nomura, Royal Bank of Canada, Royal Bank of Scotland, Standard Chartered and UBS, as well as 30 individuals.
Brazilian antitrust authority, Administrative Council for Economic Defense (Cade) rejected Telefónica’s (TEF) embargoes and kept the fine of BRL 15 million that was imposed on the company for breach of the agreement signed in 2010, by which it should stay away from TIM (TSU), controlled by Telecom Italia (TI).
With the negative for the embargoes, Telefónica must appeal of the decision. Therefore, it is necessary to wait for the posting in the “Diário Official”, the official newspaper.
The fine was imposed against Telefónica on December 4th, 2013, when the antitrust authority imposed conditions when judging the acquisition by the Company of shares of Telco, holding that controls Telecom Italia.
According to Cade, Telefónica will have to choose between seeking a new partner in Vivo (VIV), who would be entitled to have 50% of the control in this company, or selling the stakes it acquired in TIM through the purchase of shares of Telco.
Rumors have that Vodafone (VOD), who recently started operating in Brazil via enterprise services, is looking to expand into the consumer market and is interested in acquiring a stake in TIM, since it’s very unlikely that Telefónica would let got of the control on Vivo.