SAO PAULO U.S. buyout firm JC Flowers & Co is selling 40 percent of its stake in Brazilian investment bank BTG Pactual Group (BBTG11.SA), according to analysts at Bradesco BBI, partially cashing out of a two-year investment that yielded an estimated 50 percent return.
Analysts led by Carlos Firetti said in a client note that New York-based JC Flowers, a private equity firm led by former Goldman Sachs Group Inc star dealmaker Christopher Flowers, would be selling 6.53 million units of BTG Pactual at a minimum 29.50 reais ($14.46) apiece. News of the block sale triggered the steepest fall of BTG Pactual stock in eight months.
Units, a blend of common and preferred stock of BTG Pactual's investment banking and private equity divisions, fell 4.3 percent to 31.50 reais on Thursday after the announcement of the sale by an unnamed investor, who priced the stock at a 10 percent discount to Wednesday's close.
JC Flowers had made public its intention to exit its stake, which comprises about 1.8 percent of the Brazilian bank's capital. The stake, which the buyout firm acquired for $180 million in December 2010, is valued at about $270 million.
"Expectations of the sale by JC Flowers have been weighing down on shares of BTG recently," Firetti and his team wrote in a client note. "The sale may also help increase stock liquidity," they said, referring to the about 9.2 million average trading volumes for BTG Pactual stock in the São Paulo Stock Exchange.
A London-based public relations executive representing JC Flowers would not confirm whether the company plans to exit part or all of its stake in BTG Pactual.
Since founding the firm in 2001, Flowers and his partners have made money by partially or fully exiting some of their investments through initial public offerings or strategic stake sales, like they did with Japan's Shinsei Bank Ltd (8303.T) in 2004. The Japanese bank's IPO, which rival tycoon David Rubenstein dubbed the most successful private equity deal in history, reportedly netted JC Flowers more than $1 billion in profits.
BTG Pactual had said in a regulatory filing on Thursday that an unnamed shareholder, which was neither a member of BTG Pactual's controlling bloc nor part of the bank's management, was planning to auction off the shares.
News of the JC Flowers sale comes as shares of BTG Pactual have traded above their initial public offering price for more than two weeks.
Before the bank's $2 billion IPO in April 2011, Chief Executive Officer André Esteves sold a 10 percent stake in BTG in December 2010 to sovereign wealth funds and a pool of investors, including JC Flowers and Italy's Agnelli, Colombia's Santo Domingo and Panama's Mota families.
The identity of the selling shareholder may become formally known only when the transaction is concluded on Friday after 1045 local time (1245 GMT).
($1 = 2.04 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Editing by Greg Mahlich and Lisa Von Ahn)