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SAO PAULO, April 11 (Reuters) - Brazilian bourse BM&FBovespa SA is arranging loan financing to fund part of the 12.9 billion reais ($3.6 billion) that rival Cetip SA Mercados Organizados could cost, a sign that the cash portion of the deal may increase.
BM&FBovespa Chief Executive Officer Edemir Pinto said at a Monday news conference to announce the deal, which was reached on Friday after markets closed, that about 75 percent of the proposed amount could be paid in cash. However, that could rise to 85 percent due to a provision to protect Cetip shareholders from fluctuations in BM&FBovespa's stock price.
Pinto, who would run the combined entity, declined to elaborate on terms of the loan financing deal. BM&FBovespa, Latin America's largest financial bourse, is also using $1.2 billion in proceeds from the sale of a stake in longtime partner CME Group Inc to fund the Cetip takeover.
Cetip is Latin America's No. 1 securities clearinghouse and has a vast over-the-counter derivatives operation. BM&FBovespa is also undertaking expansion in Mexico, Chile and Colombia, where it recently bought or was negotiating the purchase of minority stakes in those countries' respective exchange operators.
Shares of both companies rose 2 percent on optimism that the takeover would boost BM&FBovespa's dominant regional position, controlling depositary and clearing activities for all types of assets and sourcing investors with proprietary data.
Still, analysts such as HSBC Securities Inc's Carlos Gómez-López expect tough regulatory scrutiny because the deal would remove competition for BM&FBovespa in equity trading and derivatives. Americas Trading System Brasil, a BM&FBovespa rival in the equity segment, will request antitrust watchdog Cade to investigate whether the deal infringes on competition rules.
Executives at the news conference said both companies expected authorities and shareholders to approve the deal in due time.
Reuters reported on Wednesday that Cetip had agreed to a takeover after BM&FBovespa raised its bid.
Since October, when BM&FBovespa first publicly disclosed an interest in Cetip, the management of both companies have pondered the future of their businesses as Brazil struggles with the harshest recession in more than a century and political turmoil hampers capital markets activity.
Some of the sweetened features that won Cetip's approval for the deal included interest rate-linked adjustments to the final price, a cap and floor for BM&FBovespa shares in the stock portion of the bid and a 250-million-real breakup fee.
"We discussed a tie-up for years, but it only happened after our business models grew and turned more mature," Pinto said at the news conference.
Cetip shareholders will own 12 percent of the new company and get two new seats on BM&FBovespa's enlarged 13-strong board. The boards of the São Paulo-based companies expect to approve the transaction by May 17.
$1 = 3.5883 Brazilian reais Reporting by Aluísio Alves and Guillermo Parra-Bernal; Additional reporting by Priscila Jordão in São Paulo; Editing by Jeffrey Benkoe and Lisa Von Ahn