October 16, 2017 / 1:01 PM / a year ago

Unit of Brazil antitrust watchdog sees Itaú-XP deal as 'complex'

SAO PAULO (Reuters) - Brazilian bank Itaú Unibanco Holding SA’s purchase of a minority stake in independent financial services firm XP Investimentos SA is complex due to competition concerns and needs further analysis, a unit of antitrust watchdog Cade said.

In Monday’s edition of the government gazette, Cade’s general superintendence, an advisory body, recommended the watchdog’s board demand more documentation detailing how consumers could benefit from the deal. Itaú and XP, both based in São Paulo, declined to comment on the recommendation.

Itaú, Brazil’s largest bank by assets, agreed in May to pay 5.7 billion reais ($1.8 billion) for a 49.9 percent stake in XP to grow in the retail brokerage and money management segments, where competition for new clientele is growing.

Common shares of Itaú (ITUB3.SA) dipped 0.5 percent to 39.52 reais on Monday, their first intraday fall in four sessions.

So far, the body sees some “horizontal overlapping” between Itaú and XP reaching markets for securities brokerage, asset management and product distribution. More broadly, the deal could give Itaú an edge in distributing products through XP’s retail brokerage and money management channels.

“In the light of the facts explained, the recommendation from the superintendence is that the act of concentration be declared complex,” the gazette said.

Cade, Brazil’s long-docile antitrust watchdog, has shocked executives, lawyers and bankers by rejecting two high-profile planned takeovers this year, leading cash-starved companies to consider alternatives to mergers including share offerings.

Share offerings are at a four-year high and M&A activity remains stable amid stricter legal and regulatory scrutiny beyond the competition realm.

A person familiar with the transaction said Cade could decide on the XP transaction before the end of this year. While the superintendence proposed stretching out a deadline for the decision, the person said Cade’s board could proceed with the original timetable.

($1 = 3.1576 reais)

Reporting by Guillermo Parra-Bernal; Editing by Susan Thomas

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