Boston, MA 05/01/2014 (wallstreetpr) – If shareholders agree, Banco Santander Brasil SA (ADR) (NYSE:BSBR) will return to its Spanish parent company Santander for a deal valued at $6.5 billion. The deal will see the Spanish company increase its position in the Brazilian unit bank by 25 percent.
As Banco Santander Brasil SA (ADR) (NYSE:BSBR) buys out shareholders from its Brazil bank, it will offer the shareholders about 5.8 percent stake in its Spanish business where performance track record is good.
Though Banco Santander Brasil SA (ADR) (NYSE:BSBR) performed the biggest initial public offering in Brazil’s history in 2009 where more than $8 billion was raised, the bank has failed to match the performance of rivals and its shares have plummeted significantly. Therefore, it comes as a good deal for the parent company as it will buy back the shares at a price lower than that at which they were sold. However, it is also in the best interest of the shareholders that the parent company has offered to pay about 20 percent premium on the shares.
Voluntary offer
Banco Santander Brasil SA (ADR) (NYSE:BSBR) $6.5 billion offer for the shareholders of its Brazilian unit is voluntary in that the shareholders can take or leave it. However, according to analysts, the shareholders are well-served with the offer. For example, besides the premium price that the parent company is offering, a swap for a stake in the Spanish business that has a positive performance tract record makes the deal a good one. In any case, life in Brazil is tough that Banco Santander Brasil SA (ADR) (NYSE:BSBR) might still face challenges, which means that investors could still see further loss in their share value in the company.
However, shareholders who choose to retain their position will see their shares trading in a lower tier of the Brazil exchange market.
Not a trend
Though Banco Santander Brasil SA (ADR) (NYSE:BSBR) intends to buy back the subsidiary in Brazil, the Spanish company said its operations in other South American markets will remain intact. In other words, the bank will not do to units in Chile and Mexico what it plans to do for Banco Santander Brasil SA (ADR) (NYSE:BSBR).
According to analysts at JPMorgan Chase & Co. (NYSE:JPM), the offer for Banco Santander Brasil SA (ADR) (NYSE:BSBR) is reasonable as it is well above their estimate.
