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Redecard Surges as Itau’s $5.8 Billion Offer Seen as Fair

June 18, 2012

Redecard SA (RDCD3), Brazil’s second-biggest card-payment company, rose the most in more than four months after a second appraisal of Itau Unibanco Holding SA (ITUB4)’s 11.8 billion-real ($5.7 billion) offer to take the company private is in line with a previous assessment.

Redecard gained 5.2 percent to 33.36 reais at the close of trading in Sao Paulo, the biggest gain since Feb. 7, when Itau announced its bid. It was the second-best performance on the benchmark Bovespa index, which rose 0.2 percent. Itau fell 0.7 percent to 30 reais.

“The chances of Redecard’s tender offer succeeding have now increased,” Francisco Kops and Rafael Ferraz, analysts at Banco J.Safra in Sao Paulo, wrote in a note to clients today.

Credit Suisse Group AG (CSGN), which conducted the second appraisal at the request of a minority Redecard investor, calculated shares to be worth from 34.66 reais to 38.12 reais, according to a regulatory filing after markets closed on June 15. Itau, Latin America’s largest bank by market value, said its 35-real offer is therefore “accounted for” by the appraisal, according to a June 16 e-mailed statement from the Sao Paulo- based lender.

Lazard Asset Management LLC, which owns 10 percent of Redecard, requested a second appraisal in April, arguing that the first, by NM Rothschild & Sons Ltd., undervalued the company. Rothschild valued the stock at between 34.18 reais and 37.59 reais, according to an April 5 regulatory filing by Redecard. The bank achieved the range using a free-cash-flow calculation and another one based on the share price of Cielo SA (CIEL3), Redecard’s larger competitor.

Itau’s Plans

Itau, which is Redecard’s largest shareholder with a 50 percent stake, declined to comment on whether it would change its offer to take Redecard private. The bank previously said it had no plans to raise its offer and may give up its buyout plan entirely, according to an April 30 filing. Lazard is the second- biggest investor.

“We expect Itau to proceed with its tender offer,” Mario Pierry, an analyst at Deutsche Bank AG, wrote in an e-mailed report. “Minorities do not have many options, as Itau’s 35 reais offered price is within the valuation range of both Rothschild and Credit Suisse.”

Before today, Redecard had fallen 1.1 percent in Sao Paulo since Itau announced the offering Feb. 7, compared with a gain of 22 percent for Cielo. Brazil’s benchmark stock index dropped 14 percent in the same period.

2007 IPO

The card-payment processor and its shareholders raised 4.07 billion reais selling 150.8 million shares at 27 reais each in an initial public offering in July 2007. In March 2008, Citigroup Inc. sold 40.69 million Redecard shares at 26 reais each in a public offering of 1.06 billion reais. The New York- based bank sold another 82 million Redecard shares at 24.50 reais, raising 2.01 billion reais, in March 2009.

On Feb. 7, Credit Suisse equity analyst Marcelo Telles wrote in a note to clients that he considered Itau’s offer to be fair.

To contact the reporter on this story: Francisco Marcelino in São Paulo at

To contact the editors responsible for this story: David Scheer at; David Papadopoulos at

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