Re: BPAT Banco Patagonia S.A.
Publicado: Lun Abr 19, 2010 3:49 pm
Event
Banco Patagonia confirmed in a note sent to the local SEC today that Banco do Brasil (BBAS3 BZ; R$30.50; Not Rated) is in advanced negotiations to acquire a participation in the Argentine bank, which could include a controlling stake in the entity. According to the note, an agreement could be reached in the coming days. Simultaneously, Banco do Brasil sent a note to the Brazilian SEC.
Analysis
Banco do Brasil will need to launch a tender offer for 100% of the shares, if it seeks more than 51%. According to Banco Patagonia’s bylaws, if an investor wanted to acquire a stake representing between 35% and 50% of the shares, he would need to launch a tender offer for up to 50%. But if the investor aimed at acquiring more than 51% of the shares, he should launch a tender offer for 100%. Although Banco do Brasil would need to maintain top management to run the bank in the transition period given its small operation in Argentina , we believe that, sooner or later, Banco do Brasil would seek full control of the bank.
According to our estimates, Banco do Brasil should offer approx. AR$5.00 per share if they seek control. We use a Gordon growth model to value Banco Patagonia. According to our estimates, the P/BV target multiple for Patagonia should be 1.6x. Adding premium control of 25% we believe the acquisition price should be at around 2.0x P/BV, which would result in an offering price of approx. AR$5.00 per share.
The price could pullback if the transaction fails, but Banco Patagonia will continue to price a potential takeover. The stock has rallied 50% since rumors hit the market at the end of last year, pricing a potential full tender offer by Banco do Brasil, so the price could suffer if the transaction fails. Nevertheless, we believe Banco Patagonia will continue to price a potential takeover. The bank is the perfect fit for a newcomer or for a local player aiming at increasing its share. Banco Patagonia combines a clean balance sheet, an attractive market position, a healthy loan portfolio, a well structured distribution network, and an efficient operation.
Conclusion
We see highly probable Banco do Brasil will reach an agreement with Banco Patagonia ’s current controlling group to acquire a controlling stake in the bank. Depending on the stake they seek, they will need to launch a tender offer for 50% or up to 100% of the shares. The price should be close to AR$5.00 per share, 13% above current price.
Banco Patagonia confirmed in a note sent to the local SEC today that Banco do Brasil (BBAS3 BZ; R$30.50; Not Rated) is in advanced negotiations to acquire a participation in the Argentine bank, which could include a controlling stake in the entity. According to the note, an agreement could be reached in the coming days. Simultaneously, Banco do Brasil sent a note to the Brazilian SEC.
Analysis
Banco do Brasil will need to launch a tender offer for 100% of the shares, if it seeks more than 51%. According to Banco Patagonia’s bylaws, if an investor wanted to acquire a stake representing between 35% and 50% of the shares, he would need to launch a tender offer for up to 50%. But if the investor aimed at acquiring more than 51% of the shares, he should launch a tender offer for 100%. Although Banco do Brasil would need to maintain top management to run the bank in the transition period given its small operation in Argentina , we believe that, sooner or later, Banco do Brasil would seek full control of the bank.
According to our estimates, Banco do Brasil should offer approx. AR$5.00 per share if they seek control. We use a Gordon growth model to value Banco Patagonia. According to our estimates, the P/BV target multiple for Patagonia should be 1.6x. Adding premium control of 25% we believe the acquisition price should be at around 2.0x P/BV, which would result in an offering price of approx. AR$5.00 per share.
The price could pullback if the transaction fails, but Banco Patagonia will continue to price a potential takeover. The stock has rallied 50% since rumors hit the market at the end of last year, pricing a potential full tender offer by Banco do Brasil, so the price could suffer if the transaction fails. Nevertheless, we believe Banco Patagonia will continue to price a potential takeover. The bank is the perfect fit for a newcomer or for a local player aiming at increasing its share. Banco Patagonia combines a clean balance sheet, an attractive market position, a healthy loan portfolio, a well structured distribution network, and an efficient operation.
Conclusion
We see highly probable Banco do Brasil will reach an agreement with Banco Patagonia ’s current controlling group to acquire a controlling stake in the bank. Depending on the stake they seek, they will need to launch a tender offer for 50% or up to 100% of the shares. The price should be close to AR$5.00 per share, 13% above current price.
