Brazil Releases Details of IRB Re-Insurance Co Privatization
01/23/2013| 06:49am US/Eastern
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By Rogerio Jelmayer
SAO PAULO--The Brazilian government's National Development Bank, or BNDES, on Wednesday released details of its planned privatization of re-insurance company IRB-Brasil Re, based on an initial public offering of shares.
The privatization process will take place via an increase in IRB's capital. The BNDES set the price of each new share at 2,577 Brazilian reais ($1,263). The government authorized a capital increase of between 2% and 15% for IRB.
Brazil's largest banks, including state-run banks Banco do Brasil SA (>> Banco do Brasil SA) and Caixa Economica Federal, and private-sector peers Banco Bradesco SA (>> Banco Bradesco SA) and Banco Itau Unibanco SA (>> Itau Unibanco Holding SA), will almost certainly gain day-to-day control of IRB after the privatization, according to analysts. IRB has a 40% market share in the re-insurance industry in Brazil.
The federal government, meanwhile, will hold a golden share in IRB. With the golden share, the government will keep a veto power over all key decisions, such as any eventual sale of control.
Currently, the government has a stake of 50% in IRB, while Bradesco has a 21% stake, Itau Unibanco holds a 15% stake and other small insurance companies a 14% stake.
The government said that it won't participate in the capital increase, paving the way for banks to increase their stake in IRB. IRB employees will be allowed to participate in the capital increase, along with the major banks.
"The process will provide IRB better conditions to compete in the re-insurance market, considering the new regulatory environment in which the IRB no longer enjoys exclusive rights over re-insurance," the BNDES said in its statement.
IRB, created in 1939, operated as Brazil's sole re-insurer until 2008, when the government opened the local re-insurance market to private competitors.
Under the rules, the government said IRB will have a period of five years in which to list the company's shares. If the shares aren't listed by the end of that period, then the company's controllers will be obliged to buy back any and all shares acquired by employees.
Employees can reserve IRB shares from Feb. 4 to Feb. 14.
-Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com
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