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Itau Unibanco (ITUB) Reveals Plan to Spin Off Investment in XP
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Itau Unibanco Holding S.A. (ITUB - Free Report) announced that its board of directors has given consent for plans to spin off investment in XP Inc. into a new company — Newco. The company had put forth this idea on Nov 3, 2020, post which, its shares have gained about 33%.
Itau Unibanco will be spinning off companies of the Itau Unibanco conglomerate and the spun off portion would represent 41.05% of the capital of Investment in XP. This portion will be transferred to Newco.
The lender also informed that the spin-off shall be the subject of discussion in the general meeting of shareholders. Notably, post approval, the shareholders of Itau Unibanco will be entitled to have an equity holding in Newco, whose sole asset will be the Investment in XP.
Itau Unibanco plans to divest the outstanding shares of XP, about 5% of the capital stock of of the company, as previously advised, depending on market conditions. The company plans to use proceeds from this investment to increase Basel III common equity tier I capital.
Brief Background on XP Deal
Announced in May 2017, Itau Unibanco had entered into a share purchase agreement with XP Investimentos S.A. (XP Holding), a Brazil-based brokerage firm. Post acquisition, Itau Unibanco was entitled to 49.9% of the total share capital, which made it a minority shareholder of XP Holding.
In August 2018, it received consent from the Central Bank of Brazil to execute the investment. Also, Itau Unibanco signed a concentration control agreement promising the Central Bank of Brazil that it will make no move to acquire the control of XP Holding for a period of eight years.
Itau Unibanco acquired 49.9% of the total share capital of XP Holdings through a capital increase of R$600 million and the acquisition of shares issued by XP Holding that were held by the above-mentioned parties for a total of about R$5.7 billion.
Our Take
The company’s focus on expanding business in Brazil and internationally is reflected in its recent active involvement in acquisitions. However, elevated expenses and stressed conditions in Brazil keep us apprehensive.
Shares of Itau Unibanco have lost 28.1% over the past six months compared with 30% decline of the industry.
Currently, the stock carries a Zacks Rank #4 (Sell).
UBS Group AG (UBS - Free Report) has witnessed a 19.7% upward earnings estimate revision for the current year in the past 60 days. This Zacks Rank #2 stock has gained 48.3% over the past six months.
The Bank of N.T. Butterfield & Son Ltd.’s (NTB - Free Report) 2020 earnings estimates have moved 6.2% north over the past 60 days. The company’s shares have rallied 49.5% over the past six months. It carries a Zacks Rank of 2 at present.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Itau Unibanco (ITUB) Reveals Plan to Spin Off Investment in XP
Itau Unibanco Holding S.A. (ITUB - Free Report) announced that its board of directors has given consent for plans to spin off investment in XP Inc. into a new company — Newco. The company had put forth this idea on Nov 3, 2020, post which, its shares have gained about 33%.
Itau Unibanco will be spinning off companies of the Itau Unibanco conglomerate and the spun off portion would represent 41.05% of the capital of Investment in XP. This portion will be transferred to Newco.
The lender also informed that the spin-off shall be the subject of discussion in the general meeting of shareholders. Notably, post approval, the shareholders of Itau Unibanco will be entitled to have an equity holding in Newco, whose sole asset will be the Investment in XP.
Itau Unibanco plans to divest the outstanding shares of XP, about 5% of the capital stock of of the company, as previously advised, depending on market conditions. The company plans to use proceeds from this investment to increase Basel III common equity tier I capital.
Brief Background on XP Deal
Announced in May 2017, Itau Unibanco had entered into a share purchase agreement with XP Investimentos S.A. (XP Holding), a Brazil-based brokerage firm. Post acquisition, Itau Unibanco was entitled to 49.9% of the total share capital, which made it a minority shareholder of XP Holding.
In August 2018, it received consent from the Central Bank of Brazil to execute the investment. Also, Itau Unibanco signed a concentration control agreement promising the Central Bank of Brazil that it will make no move to acquire the control of XP Holding for a period of eight years.
Itau Unibanco acquired 49.9% of the total share capital of XP Holdings through a capital increase of R$600 million and the acquisition of shares issued by XP Holding that were held by the above-mentioned parties for a total of about R$5.7 billion.
Our Take
The company’s focus on expanding business in Brazil and internationally is reflected in its recent active involvement in acquisitions. However, elevated expenses and stressed conditions in Brazil keep us apprehensive.
Shares of Itau Unibanco have lost 28.1% over the past six months compared with 30% decline of the industry.
Currently, the stock carries a Zacks Rank #4 (Sell).
Stocks to Consider
Earnings estimates for the current year for Bank of Montreal (BMO - Free Report) have moved 3.4% north over the past 60 days. The company’s shares have gained 58.1% over the past six months. It currently has a Zacks Rank of 2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UBS Group AG (UBS - Free Report) has witnessed a 19.7% upward earnings estimate revision for the current year in the past 60 days. This Zacks Rank #2 stock has gained 48.3% over the past six months.
The Bank of N.T. Butterfield & Son Ltd.’s (NTB - Free Report) 2020 earnings estimates have moved 6.2% north over the past 60 days. The company’s shares have rallied 49.5% over the past six months. It carries a Zacks Rank of 2 at present.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>