Last updated: April 4, 2012 9:29 pm

BTG heralds new era for emerging markets

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The world according to André Esteves is one that might alarm bankers in the financial centres of developed markets.

Emerging markets no longer have as much or indeed, any need to involve their counterparts in advanced economies when transacting among themselves, the controlling shareholder of Brazil’s BTG Pactual, one of the world’s largest homegrown investment banks, is fond of saying.

“Our vision is that the world is flat – there is no need any more for fund flows coming from China to Latin America to pass through London or New York,” Mr Esteves said in February while announcing BTG’s merger with Chilean rival Celfin Capital.

It is a philosophy that seems to be working, if Mr Esteves’ success in increasing the value of BTG’s equity – and his personal wealth – is any measure.

In a few short years, he has taken the value of the bank from less than a few billion dollars to $15bn, if an initial public offering planned for April 26 goes as planned.

For his own part, the 43-year-old is listed by Forbes as one of Brazil’s richest men, with a fortune of $3bn. Under the proposed IPO, however, the value of his 30 per cent stake in the investment bank will shoot up to closer to $5bn.

Mr Esteves joined BTG Pactual as a 21-year-old systems analyst in 1989. A decade later, he and younger partners wrested control of the institution from its founders, just in time to catch the upswing in Brazil’s economy and the emergence of its capital markets in the early to mid-2000s.

In 2006, at the age of just 37 years, Mr Esteves sold the bank to UBS for $2.6bn, a price that many had thought overly generous.

After the 2009 financial crisis, he bought the bank back from UBS for about the same amount and merged it with an asset management business he had started. In December 2010, he increased the value of the company by four times with the $1.8bn sale of about 19 per cent to a group of investors and sovereign wealth funds – including China’s CIC – in a deal that valued the company at about $10bn.

Then came the merger with Celfin that extended BTG’s reach into the Latin American boom economies of Chile, Colombia and Peru. He also formed an alliance with China’s Citic Securities, giving the Brazilian bank a portal into the world’s second-largest economy. “I never worked hard so that I could sell up and go to the beach,” he told the Financial Times in 2009. “I have always worked to be part of something bigger, to be a driver of change.”

The bank has stayed true to that notion. It was the top adviser in Brazilian mergers and acquisitions last year, arranging 51 deals worth a total of $25.6bn, according to Dealogic, the data company.

In equity capital markets, it was second last year and first in 2010, while in debt it ranked in the top 10.

But things have not always gone Mr Esteves’ way. In 2011, BTG was left red-faced when Abilio Diniz, the Brazilian retail baron, enlisted the bank and Brazil’s development finance institution, BNDES, to fund the merger of his company, Pão de Açúcar, with France’s Carrefour. This was in spite of strong opposition from Mr Diniz’s partner, Casino, another French company with which he had previously agreed to hand over control of the retail group.

The deal was scotched after the government objected to the use of state money to finance a deal that contributed little to the national interest.

Still, if Mr Esteves is able to pull off BTG’s IPO, few inside the bank at least will remember such episodes.

The IPO will value the shareholdings of the bank’s 35 senior partners at $150m each, although these will be subject to complex rules restricting their sale.

The consummate dealmaker has turned BTG into the quintessential millionaires’ factory.

Now the challenge is whether he can achieve a scale to match that of a global investment bank such as Goldman Sachs.

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