Thursday, October 21st 2010 - 11:14 UTC

Qatar sovereign wealth fund buys 5% of Banco Santander Brazil

Banco Santander SA, Spain’s biggest bank, said this week that it will sell 5% of its Brazilian unit to Qatar Holding LLC for 1.95 billion Euros (Approx. 2.7 billion US dollars).

The Qatar fund also holds shares in Volkswagen, Barclays and Sainsbury’s, among others

Qatar Holding, the investment arm of the Gulf nation’s sovereign wealth fund, will buy bonds that must be converted into shares of Banco Santander Brasil, the parent company said in a regulatory filing.

The three-year bonds come with an annual coupon of 6.75% and the exchange price for the stock is 23.75 Real (14.22) a share, Santander said.

“This investment means the incorporation of Qatar Holding as a strategic partner of the Santander Group in Brazil and the rest of Latin America,” the Spanish bank said.

The deal will also move Santander Brasil closer to meeting the regulatory requirement that 25% of its shares be traded on the Sao Paulo stock exchange. The bank still owned 83.6% of its Brazilian branch after an initial public offering last year.

“This investment means the incorporation of Qatar Holding as a strategic partner of the Santander Group in Brazil and the rest of Latin America” the Spanish bank said. Barclays Capital advised Qatar on the transaction, Qatar Holding said.

Santander has spent at least 10 billion US dollars since June buying up businesses from Poland, where it agreed to pay 2.94 billion Euros ($4.1 billion) for 70% of Bank Zachodni WBK SA, to the U.K., where it’s buying 318 branches of Royal Bank of Scotland Group Plc for 1.7 billion pounds ($2.7 billion).

The purchases announced this year will shave as much as 1.4 percentage points from its core Tier 1 capital ratio, a measure of financial strength that stood at 8.6% at the end of June, according to Santander estimates. Even so, the bank expects to be able to keep the measure above 8% in 2011 as it generates capital from earnings.

Qatar Holding is the investment arm of the Qatar Investment Authority, the Persian Gulf country’s sovereign wealth fund that is a shareholder in Volkswagen AG, Barclays Plc and J Sainsbury Plc. The fund may spend 30 billion USD this year, matching the value of investments last year, the country’s Prime Minister Sheikh Hamad Bin Jasim Bin Jaber Al-Thani said in March.

Qatar bought Harrods Ltd., owner of the London department store, for 2.2 billion earlier this year and agreed to invest 2.8 billion in an initial public offering by Agricultural Bank of China Ltd. The Qatar Investment Authority intends to invest 5 billion in Greece’s economy, according to a memorandum signed between the two countries last month.

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