(Adds details on plan, share performance, background throughout)
By Guillermo Parra-Bernal and Bruno Federowski
SAO PAULO, Jan 27 (Reuters) - Grupo BTG Pactual SA is gauging the impact of segregating stock trading of its two main business divisions, a sign Latin America’s No. 1 independent investment bank is betting on enhanced transparency to regain investor trust.
In securities filing on Friday, BTG Pactual said it is gauging all the legal, regulatory and operational aspects of separating Banco BTG Pactual SA and BTG Pactual Participations Ltd. Trading of Grupo BTG Pactual’s units, a blend of common and preferred shares in both divisions, will be maintained, the filing said.
Banco BTG Pactual encompasses the group’s investment banking and money management activities, while BTG Pactual Participations handles investments made with the bank’s own capital such as private equity, global hedge funds and property.
Grupo BTG Pactual’s controlling shareholders have signaled they will endorse the business segregation plan, which could entail risks for minority holders of Grupo BTG Pactual’s units, the filing said. Both divisions convened shareholder meetings on Feb. 13 and Feb. 3, respectively, to discuss the plan.
Units fell 1.1 percent to 16.81 reais in early Friday afternoon trading, paring gains to 23 percent this year.
The move underscores Grupo BTG Pactual’s steps to reignite growth and restore its reputation 14 months after founder and former Chief Executive André Esteves was arrested in connection with a massive corruption probe in Brazil.
According to the filing, the plan could enhance transparency about the assets of each division, boost trading volumes for Grupo BTG Pactual’s securities and improve each of the divisions’ capital structure.
For years, many investors criticized Grupo BTG Pactual’s structure, saying it encouraged Esteves and his partners to take on excessive risk in sectors highly exposed to Brazil’s struggling economy.
Some questioned whether the investment bank and the private-equity divisions incurred conflicts of interest with clients that they advised or with which they competed for deals.
In a November 2013 interview with Reuters, Esteves contrasted Grupo BTG Pactual with traditional Wall Street investment banks, highlighting the firm’s practice of teaming up with clients to invest, as opposed to just buying and trading securities in financial markets.
The November 2015 arrest of Esteves, who owns about 28 percent of BTG Pactual and had steered the bank through Brazil’s deepest recession in decades, sent the lender’s shares and bonds into a tailspin and forced the bank to sell assets to bolster client confidence. (Editing by Daniel Flynn and Meredith Mazzilli)