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Brazilian Watchdog to Probe Deal at Embattled Investment Bank

  • Reuters

Andre Esteves, former CEO of BTG Pactual SA bank, is pictured during an interview in Sao Paulo, July 22, 2014.

Andre Esteves, former CEO of BTG Pactual SA bank, is pictured during an interview in Sao Paulo, July 22, 2014.

Brazil's securities industry watchdog is investigating the process that led to the exit of Andre Esteves from the holding company that controls Grupo BTG Pactual SA, and whether it configured a change of control at the embattled Brazilian investment bank.

The Rio de Janeiro watchdog, known as CVM, will focus on determining whether the transaction by which Esteves traded his voting stock for nonvoting stock in the BTG Pactual Holding vehicle automatically triggered a tender to buy out minority shareholders, a spokeswoman said Thursday.

Founding partners of BTG Pactual took control of the bank from Esteves on Wednesday, in a bid to distance the firm from the most sweeping corruption investigation in Brazil's history.

Esteves was arrested November 25 on suspicion he tried to silence a witness who could potentially incriminate him in a corruption probe known as Operation Car Wash.

Chairman Persio Arida told Reuters that the transaction did not configure a change of control in the bank because the share swap that removed Esteves took place at the holding company that owns a majority of BTG Pactual. Until recently, Esteves had almost 29 percent of the bank's capital, and had a so-called golden share that gave him veto power over strategic decisions.

The deal involved no cash disbursements, a source briefed on the matter told Reuters on Wednesday. Esteves will no longer take part in decision-making and will become a mere dividend earner, Arida said.

Under Brazil's securities law, transactions in which an acquirer wins control of the target company must be followed by a tender offer for minority shareholders.

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