Jan 7 (Reuters) - Brazilian brokerage XP Inc said on
Friday it would buy a stake of up to a 100% in investment
platform Banco Modal S.A., which is backed by Credit
Suisse, valuing it at $528.5 million in an all-share
The proposed deal amount offers a premium of roughly 50%
over Modal's last share price on Thursday. XP will issue up to
19.5 million shares to give Modal's shareholders as payment.
Both firms will have 3.8 million clients and net revenue of
11.8 billion reais ($2.07 billion), XP said in a filing, adding
there was immaterial overlap between both companies' clients.
"Brazil has one of the most concentrated financial sectors
globally and together we'll be able to be even more competitive
against the traditional banks," XP Chief Executive Thiago Maffra
said in a filing.
In a note to clients, Guide's analysts said the deal is
positive for XP as it will increase the brokerage's market
share. Modal had 30.4 billion reais under custody in September,
versus XP's 789 billion reais.
Modal, whose shares were up 44% in the morning trading, will
remain an independent company and its shareholders will hold a
3.49% stake in its acquirer. XP's Brazilian Depositary Receipts
were up 0.81%.
The move comes as shares in XP and Modal fell last year, due
to fierce competition among fintechs and brick-and-mortar banks.
Brazil's central bank recent aggressive hikes in the benchmark
interest rate also pose a challenge to brokers' inflow of money.
Shares in Modal were priced at 20 reais each in an initial
public offering in April last year and closed Thursday's trading
session at 8.35 reais. XP's shares fell roughly 29% in the last
12 months, ending at $27.09.
Modal will bring to XP some 500,000 active brokerage clients
and more expertise in banking, an area in which XP plans to
If Modal's minority shareholders do not approve the deal, XP
said it will acquire controlling shareholders' 55.7% stake and
offer to buy out any willing minority holders.
Credit Suisse, which has a 15.8% stake in Modal and
distributes its wealth management products through the broker,
said in a statement that the deal will offer it an opportunity
to serve more clients.
($1 = 5.6883 reais)
(Reporting by Carolina Mandl in Sao Paulo and Niket Nishant in
Editing by Vinay Dwivedi, David Evans and Nick Zieminski)