Bloomberg News

Santander May Sell Brazil Unit Stake, Itau Unibanco Says

November 18, 2011

(Updates with closing prices in second paragraph.)

Nov. 17 (Bloomberg) -- Banco Santander SA, Spain’s biggest bank, may sell $1 billion in shares of its Brazil unit, Itau Unibanco Holding SA said. Santander posted its biggest drop in more than a month in Sao Paulo trading.

The lender may sell 121 million American depositary receipts, or 3.2 percent of the Brazilian business, Regina Longo Sanchez, an Itau analyst, wrote yesterday in a note, citing unidentified Santander management. Santander declined 4.6 percent to 13.60 reais ($7.64) in Sao Paulo, the biggest decline since Sept. 30, and dropped 1.4 percent in Madrid.

“We do not believe it would make sense to file the prospectus now unless the controlling shareholders are willing to start divesting from their ADRs soon,” Sanchez wrote. “This event confirms our belief that Santander Brasil investors are subject to certain risks related to Santander Brasil’s controlling shareholders.”

Santander filed a prospectus yesterday, saying the unit’s controlling shareholders could sell as much as 310.8 million ADRs. Madrid-based Santander has an 81 percent stake in the Brazilian unit, according to its website. The amount of stock held by minority shareholders would increase to 26 percent from 17 percent when the offering is complete, the prospectus said.

The sale, which followed the initial public offering of shares in the Brazilian unit, will help Santander meet a commitment to have 25 percent of the shares traded on the Sao Paulo stock exchange.

Crown ‘Jewel’

“The eventual sale of ADRs by the controlling shareholders will create an overhang,” hurting both stocks, Sanchez wrote.

Yves Kuhn, a fund manager at Swisscanto Asset Management AG in Zurich, said he sold Santander Brazil shares earlier this year partly because of concern that Santander might sell more shares to raise cash. Santander has been selling assets, including stakes in its Latin American insurance business and U.S. auto loans unit, to help boost capital and absorb loan defaults.

“I assume the Brazilian business is kind of the jewel in the crown for Santander at the moment,” said Kuhn, who manages about $900 million in emerging-market stocks at Swisscanto. “They must have a reason to sell and one of the reasons could be to increase liquidity for the parent.”

A spokesman for Santander in Madrid, who asked not to be named in line with company policy, declined to comment.

--With assistance from Ney Hayashi in Sao Paulo. Editors: William Ahearn, Peter Eichenbaum

To contact the reporters for this story: Charles Penty in Madrid at; Francisco Marcelino in Sao Paulo at

To contact the editor responsible for this story: Rick Green in New York at

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