SÃO PAULO, Brazil â€" Banco Santander announced on Tuesday a deal to acquire the 25 percent of its Brazilian unit, Santander Brasil, that it does not already own for 4.69 billion euros, or $6.52 billion.
As part of the deal, Santander is offering shares in the parent company in exchange for shares in the Brazilian unit.
The price offered for Santander Brasil is 15.31 reais, or $6.92, per unit, a 20 percent premium over Monday’s closing price.
If all of Santander Brasil’s shareholders accept the offer, Santander would issue 665 million shares in the parent company, the equivalent of 5.8 percent of its current float. The new shares will trade on the São Paulo stock exchange as Brazilian depositary receipts. Owners of American depositary receipts in Santander Brasil would receive A.D.R.s in Santander Spain.
The offer is voluntary, so Santander Brasil shareholders can keep their shares, which will continue to trade in São Paulo. But Andre Riva Gargiulo, senior banking analyst for Grupo Bursátil Mexicano in Brazil, said shareholders had little choice but to accept the offer.
“Even though the shares will continue to trade, they will have very little liquidity and will now be listed in a lower corporate governance tier,†he said.
Although Mr. Gargiulo termed the offer “unfriendly,†he said the price Santander Spain was offering was in line with his estimate for the shares’ potential upside.
Shares of Santander Brasil were up about 16.6 percent Tuesday in São Paulo to 14.91 reais, indicating market confidence that the deal will close.
Santander held an I.P.O. of its Brazilian subsidiary in 2009, when Brazil’s markets were booming. It raised $8.05 billion in the largest I.P.O. in Brazil’s history.
Eduardo Nishio, financial sector analyst for the São Paulo investment bank Brasil Plural, noted that Santander Brasil’s share performance since has been “brutal†for investors.
At the I.P.O., Santander Brasil listed its shares at 23.5 reais apiece. Had investors at the time simply put those 23.5 reais in short-term Brazilian government treasuries, they would now have 36 reais, or nearly 2.4 times the current share price.
“It is clearly a good deal for Santander Spain, which is swapping its own shares, which have done relatively well in recent years, for shares which have done very poorly,†Mr. Nishio said
Mr. Nishio said Santander Brasil’s performance since its I.P.O. had been “disappointing,†with growth and profits lower than its main competitors, while its Spanish parent often used its Brazilian resources to strengthen its own capital position.
In a research report Tuesday morning, J.P. Morgan called the offer “reasonable†because it was well above what the firm estimated to be Santander Brasil’s fair value, 14 reais a share.
J.P. Morgan’s analysts added that they did not expect Santander Spain to make similar offers for its other publicly traded Latin American subsidiaries, Santander Chile and Santander Mexico.
