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Itaú Unibanco looks to take control of Redecard

by Lou Whiteman  |  Published February 7, 2012 at 1:26 PM
redecard.JPGBrazilian lender Itaú Unibanco Holding SA on Tuesday, Feb. 7, offered 11.77 billion reais ($6.81 billion) to buy out minority shareholders of card payment processor Redecard SA.

São Paulo-based Itaú Unibanco, which already owns slightly more than 50% of Redecard, is offering R$35 per share, a premium of 9.9% over the company's R$31.84 close on the São Paulo Stock Exchange. The bank, Brazil's largest by market capitalization, said in a regulatory filing posted to its website that it would delist Redecard after the deal closes.

Shares of Redecard traded up R$2.81, to 8.7%, or R$34.85 on Tuesday.

Redecard of Barueri, Brazil, was founded as Credicard in 1970 by a consortium including Banco Itaú; União de Bancos Brasileiros, known as Unibanco; and Citibank. The payment-processing arm of Credicard was spun off in 1996 as Redecard, and went public in 2007 in an offering that raised R$4.07 billion. Citigroup Inc. listed its Redecard stake among the assets set for disposal to repay the U.S. government's bailout of the bank.

Redecard reported net income of $813 million on sales of $1.5 billion in 2011. But analysts have expressed concerns that the company could be falling behind rivals including Cielo SA, the largest payment system company in Latin America. The Brazilian government last year sought to break the stranglehold Redecard and Cielo have on the country's payment-processing sector, creating opportunities for upstarts to enter the business with lower fees.

The CEO of Redecard last week said the company would double capital spending in 2012, to R$500 million, in order to improve efficiency and be better able to compete on price. Itaú and Unibanco merged in 2008, leaving the surviving entity as the lead shareholder of Redecard. Bringing the subsidiary in-house could help Itaú Unibanco to streamline operations and make Redecard a better competitor.
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Tags: Cielo SA | Citibank | Citigroup Inc. | Credicard | Itaú Unibanco Holding SA | Redecard SA | São Paulo Stock Exchange | União de Bancos Brasileiros

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