Brazil's Fator eyes brokerage takeovers

By Elzio Barreto

SAO PAULO (Reuters) - Banco Fator, one of Brazil's last independent investment banks, plans to buy domestic brokerages in the expectation that stock trading in the country will surge in the years ahead, Chief Executive Manoel Horacio da Silva said on Tuesday.

The bank sees four or five good takeover targets and has "flirted" with some candidates, though no final agreements are in the works, he said. Consolidation among brokerages is ripe as banks seek to cut costs

Fator's brokerage was the biggest at the Sao Paulo stock exchange in 2004, but fell in the rankings in the past few years just as trading volume grew and the number of initial public offerings in Brazil jumped to record highs.

"We are buyers. We will try to bulk up the brokerage by acquiring others," Silva said at the Reuters Latin America Investment Summit in Sao Paulo.

"It's very expensive to run a brokerage, to maintain the compliance, risk. These (smaller) companies will have no way out. There will have to be consolidation."

The bank also plans to take advantage of a windfall from the sale of stakes in Brazil's two largest financial exchanges, Bovespa Holding BOVH3.SA and BM&F SA BMEF3.SA, to launch a private equity firm, called Fator Capital, and four separate funds.

Fator is in talks with a domestic bank and a local pension fund over a fund with 400 million reais ($228.6 million) in assets that will invest in medium-sized companies, Silva said.

The bank is also in discussions with a major foreign bank to raise $600 million for another fund to invest in infrastructure in Brazil, mainly energy projects, he said. Talks with the partners for the two funds should be concluded in 30 or 40 days.  Continued...