Santander may raise up to $8.6 bln from Brazil IPO
Spain's biggest bank Santander could raise about 13.13 billion reais ($7.3 billion) by listing 16.2 percent of its Brazilian unit in the Latin American country's biggest ever initial public offering.
Banco Santander's Brazilian unit filed on Monday to sell 525 million units in New York and Sao Paulo, each representing 55 common shares and 50 preferred shares, according to the prospectus for the offering. The bank will offer each unit at a price of 22 reais to 25 reais each, with final pricing due on Oct. 6.
The deal would boost Santander's finances as regulators impose tighter controls on the banking sector and will follow recent moves by Spanish peers BBVA and Popular to strengthen their capital bases.
The offering might rise to 15.6 billion reais, if underwriters exercise their option to sell 100 million additional units to meet demand.
The IPO would also be the biggest in Brazil's history, topping a previous record set in June when credit card company VisaNet raised 8.4 billion reais. It would also be the largest IPO on a U.S. exchange since Visa Inc.'s $19.5 billion offering in March 2008.
The offering would be a reflection of the relative strength of the Brazilian banking sector and expectations over lending growth in the coming years as the economy exits a recession, said Joao Augusto Frota Sales of the Lopes Filho financial consultancy in Rio de Janeiro.
We have to see the price of the offering given the outlook for 2010, 2011 when the perspectives for Brazil's credit markets are very good, Frota Sales said. It's not cheap, but it's in line with expectations for Brazil's financial system as a whole.
The units will trade on the Sao Paulo stock exchange under the symbol SANB11.SA.
BPI analysts said in a research note the offering could have a positive impact of about 78 and 88 basis points on Santander's capital ratios.
The eurozone's biggest bank's core capital ratio stood at 7.5 percent at the end of June.
The response by investors to the Brazilian share offering will show if Santander's early expansion in the country -- seen as more attractive at this point than other Latin American markets -- is paying off.
Brazil might soon be the new flagship of the group, accounting for 27 percent of its value in 2011, said Evolution Securities bank analyst Arturo de Frias Marques.
BPI flagged that the return on equity for Santander's Brazilian operations was 25.7 percent at the end of June.
Santander's Brazilian unit had 2.45 billion reais in profits in the first half of 2009, compared with pro-forma net income of 2.17 billion reais in the same period a year earlier, the prospectus said.
The bank plans to use 70 percent of the proceeds from the offering to open new bank branches, install new automated teller machines and increase lending to Brazilian consumers, according to the prospectus.
The Brazilian unit will use 20 percent of the funds to improve its funding structure, while 10 percent of the proceeds will be used to increase its Basel capital requirements.
Once the Brazil listing is completed, with the shares due to start trading on the New York Stock Exchange on Oct. 7 and on the Sao Paulo exchange Oct. 8, Santander Brasil's free float will be 15.6 percent, excluding a green shoe of additional shares which may be offered depending on demand.
Santander shares closed 0.5 percent lower at 11 euros, compared with a 0.42 percent drop in Spain's blue chip IBEX-35 index .IBEX and a 1.6 percent fall in European banks .SX7P.
($1=1.809 reais)
(Additional reporting by Elzio Barreto in Sao Paulo; editing by Carol Bishopric)
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