October 18, 2010 7:54 pm

Santander sells Brazil stake to Qatar

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Qatari investors have made their first significant move into Latin America with the $2.72bn purchase of a convertible stake in the Brazilian business of Santander, the Spanish bank.

Qatar Holding, the direct investment arm of the Qatar Investment Authority, one of the gulf state’s newest sovereign wealth funds, has subscribed to a bond issue that will convert into a 5 per cent stake in the equity of Banco Santander Brasil.

The QIA, which has assets of about $80bn, has benefited from the country’s transformation from a sleepy Gulf backwater into the world’s largest exporter of liquefied natural gas.

The peninsula is now the world’s richest country per capita but its relatively small size – there are about 200,000 native Qataris – means that much of the financial windfall has to be invested overseas.

The group and its various arms have been looking to invest more into emerging markets in addition to their more high-profile stakes in western companies, such as J Sainsbury, Harrods, Fairmont Raffles, Credit Suisse and Barclays.

Qatar Holding bought $2.8bn of shares in Agricultural Bank of China’s initial public offering this summer, and the country has launched a $5bn commodities and real estate-focused fund together with the Malaysian government.

Aabar Investments, one of Abu Dhabi’s several state investment vehicles, made a $328m investment in Banco Santander Brazil’s American Depositary Shares in October 2009.

Qatar Holding said the investment in Santander was the start of a long-term strategic partnership with the bank and a commitment to the growing economy of Latin America.

Santander is also eagerly investing outside its home market, in both developed and emerging economies, but is obliged to reduce its majority stake in its Brazilian business so the free float of shares reaches at least 25 per cent at the end of 2014, up from about 16 per cent now.

The bond sale will also raise much-needed capital for the bank, following a recent acquisition spree that has seen it buy assets in the UK, Poland, Germany and the US. Santander said it had not decided whether the bonds issued to Qatar Holding would convert into shares from its own holdings or from new stock.

The three-year bonds have a coupon of 6.75 per cent and will be converted at a price of 23.75 reais per share, compared with a close of 24.88 reais per share last Friday.

Qatar Holding was advised by Barclays Capital and Santander by Bank of America Merrill Lynch.

Credit Suisse, in which Qatar owns a stake, has generally acted as the “house bank” for the country’s investment funds in recent years.

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