BB to share control of IRB with Itaú Unibanco, Bradesco, says IRB head

Tuesday, April 12, 2011

Federally owned Banco do Brasil (BB) will share control with private sector banking rivals Itaú Unibanco (NYSE: ITUB) and Bradesco (NYSE: BB) of federal reinsurer IRB when the latter is privatized, local financial daily Valor Econômico reported IRB president Leonardo André Paixão as saying.

The government currently holds 50% of IRB, with Bradesco and Itaú Unibanco being the two largest minority shareholders with 21.2% and 15.4%, respectively, and several other insurance companies owning smaller stakes. The main idea behind privatizing IRB is to prepare the company for expansion abroad and to better compete with large international reinsurance groups in the domestic market, Paixão said.

The government paved the way for the upcoming privatization last week when it charged national development bank BNDES with starting the process, which includes tender procedures, acquiring studies of economic impact, and legal and audit assistance. This process is slated to take at least six months.

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After the privatization, the government will be a minority shareholder - with a so-called "golden share" - and form part of the controlling shareholder group, since the reinsurance sector is a strategic industry for Brazil given the many infrastructure projects being undertaken in the country, Paixão said.

An IPO of up to 10% of IRB's shares within the next five years is also part of the privatization plan.

Bradesco owns Brazil's largest insurance group, Bradesco Seguros, and the insurance arms of BB and Itaú Unibanco are also among the biggest in the country.