M&A

8 October, 2009

Santander conducts IPO in Brasil

* Santander IPO record in Brazil, biggest in US since Visa

* Santander Brasil priced IPO in middle of expected range

* Shares to start trading Oct. 7 (Adds offering details, analyst comments)

By Elzio Barreto and Phil Wahba

SAO PAULO/NEW YORK, Oct 6 (Reuters) - Banco Santander's Brazilian unit raised raised 14.1 billion reais ($8.05 billion) in a record initial public offering in Brazil and the largest IPO on a U.S. exchange in 18 months.

The bank, formally known as Banco Santander (Brasil) SA (SANB11.SA) (BSBR.N), sold 600 million units at a price of 23.5 reais each, according to a filing with Brazil's securities regulator.

The size of the float will likely prevent the stock from having a robust first day jump on Wednesday, said one analyst.

"Most people that wanted the stock, got the stock," said Francis Gaskins, president of research firm IPO Desktop. "The size of the deal sopped up a lot of the demand."

The bank had filed to sell 525 million units, with each unit representing 55 common shares (SANB3.SA) and 50 preferred shares (SANB4.SA), but the offering was increased 75 million units to meet demand from investors.

Santander priced the IPO in the middle of its expected range of 22 reais-25 reais in Sao Paulo, while U.S. traded shares were priced at $13.50 each, according to an underwriter of the offering.

"Looking at the long term prospects for Santander, which are very bright even considering short term challenges, the shares are fairly valued where they are," said Morningstar equity analyst Maclovio Pina, who had set a fair value price of $13 for Santander's U.S. traded stock.

Trading of the shares on Wednesday "would be more based on demand than where the fundamentals are heading," he added.

The IPO capped months of torrid activity in Brazil's stock market, which had 21.76 billion reais in share sales since late June. The offering also benefited from growing appetite for emerging market securities that has helped push the benchmark Bovespa index .BVSP 68 percent higher so far in 2009.

Santander Brasil, a unit of Spain's Santander (SAN.MC), will list the units in the form of American depositary shares (ADSs) on the New York Stock Exchange under the symbol "BSBR" and in Sao Paulo under the symbol "SANB11."

The IPO was the largest ever for a Brazilian company, beating the offering by credit card processor VisaNet in June and the biggest in the world since Visa Inc's (V.N) offering in March 2008.

Santander Brasil surpassed the IPO by China State Construction Engineering Corp (601668.SS), which raised $7.3 billion in July.
Santander is the third largest private-sector bank in Brazil by assets, with a 10.2 percent market share, behind Itau Unibanco (ITUB4.SA)(ITUB.N) and Bradesco (BBDC4.SA)(BBD.N).

The bank has expanded with six takeovers in Brazil over the past 12 years, including the acquisition of Sao Paulo state bank Banespa in 2000 for 7 billion reais.

Santander purchased ABN Amro's Banco Real unit in Brazil in 2008 as part of its 70-billion-euro bid for the Dutch firm with Royal Bank of Scotland and Belgian-Dutch Fortis.

The Brazilian unit has emerged as one of the most profitable parts of Santander, accounting for 20 percent of its net income in the first half of 2009.

Banco Santander expects net IPO proceeds of $6.8 billion, and will use about 70 percent of the funds to expand its network of branches and install automatic teller machines. It will also use some of the proceeds to improve its capital ratios, according to its U.S. regulatory filing.

Banco Santander had 3,603 full-service branches and smaller service centers in Brazil as of December 2008.

In the six months ended in June 2009, Santander's Brazilian unit reported net interest income of $5.5 billion and profits of $1.25 billion.

(Editing Bernard Orr) ($1=1.75 reais)

Source: http://www.reuters.com