(Reuters) May 29, 2012 – The private-equity unit of Brazilian investment banking powerhouse BTG Pactual agreed on Tuesday to buy a minority stake in local apparel retailer Leader Participações, the latest in a series of buyouts in a consumer sector boosted by a thriving middle class.
BTG Pactual Participations and two investment funds it controls will pay 558.4 million reais ($281 million) in cash for a 35.9 percent stake in Leader, BTG said in a securities filing on Tuesday. The bank pledged to pour 106.7 million reais of fresh capital into the retailer, which would give it an additional 6.4 percent stake.
The purchase is the second that São Paulo-based BTG Pactual, controlled by Brazilian billionaire and financial wunderkind André Esteves, has unveiled since its $1.99 billion initial public offering in April. On April 30, the bank paid an undisclosed sum to join the controlling bloc of BodyTech, Latin America’s biggest fitness chain.
The bank’s private-equity arm is stepping up acquisitions of consumer-related companies in Brazil, where the emergence of about 40 million people from poverty over the past decade has sparked a boom in demand for clothing and entertainment services.
Leader’s controlling shareholders gave BTG Pactual an option to acquire common stock that could increase the bank’s stake in the company by another 20 percent to 30 percent. The option takes effect 90 days after the BTG-Leader deal closes.
BTG Pactual beat out a number of bidders for Leader during the sale process, which began last year, a source with direct knowledge of the deal told Reuters.
The deal requires regulatory approval.
Lojas Renner, Brazil’s biggest listed apparel retailer, tried to buy Leader for 670 million reais in cash in mid-2008. The deal was terminated later that year after local credit markets seized up.
Shares of BTG Pactual rose 0.5 percent to 26.93 reais in Tuesday trading. The shares have shed about 15 percent since their late-April debut.
Private-equity firms are flush with cash after raising more than $7 billion for their Brazil investments last year. Three out of four Latin American private equity-led mergers and acquisition deals last year took place in Brazil, industry group LAVCA said in March.
Last July, BTG Pactual’s buyout unit raised $1.6 billion for a private equity fund to expand investment in nonfinancial industries. The fund began life shortly thereafter as Brazil’s first cycle of massive private equity investments matured.
Rio de Janeiro-based Banco Modal advised Leader on the transaction.