General Atlantic Takes Stake in Brazilian Firm

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(New York Times) December 6, 2012 – The American private equity firm General Atlantic has agreed to invest $200 million for a minority stake in the Brazilian financial services firm XP Investimentos.

The deal, announced by the companies on Wednesday, is subject to approval by Brazilian regulatory agencies.

General Atlantic, which has been in Brazil for 10 years, appears to be making a bet on an expanding financial services sector and middle class even as the country’s growth continues to weaken and it continues to have difficulties improving competitiveness. One reason is that once sky-high interest rates here continue to fall, requiring Brazilians to have to think about alternatives for investing their wealth.

“Everyone talks about the rise of Brazil’s middle class, but that’s already happened,” Martín Escobari, a General Atlantic managing director and head of Latin American investments, said in an interview with DealBook.

He said the firm was more focused on the “rise of the investor class since now they need to think more strategically about how they allocate their wealth,” adding that he saw parallels to the United States in the 1980s, when interest rates fell sharply.

XP Investimentos is an independent retail broker-dealer and financial advisory company with a valuation of approximately $571 million, according to a company co-founder, Marcelo Maisonnave de Oliveira.

Part of the transaction will involve purchasing shares from Actis Capital, which invested $48 million in 2010.

The deal is the fourth in 12 months for General Atlantic, according to Mr. Escobari, a period in which it has made half of its investments in Latin America.

Those four companies are Aceco TI, Despegar.com, Linx and Sura Asset Management. The investments suggest that the sectors the firm is focusing on are data and enterprise software, e-commerce and financial services. Despegar is an online travel site whose majority shareholder is Tiger Global. Its other investors include Sequoia Capital and Accel Partners.

General Atlantic has invested about $1.5 billion in its eight deals in Latin America, Mr. Escobari said, in increments of about $100 million to $150 million.

Mr. Escobari was formerly with Advent International and was co-founder of the Brazilian online company Submarino.