Bloomberg Línea — Brazilian bank Itaú (ITUB4) has announced an agreement to acquire 50.1% of Avenue, a brokerage in the United States focused on Brazilians.
The deal represents a strategic move by the country’s largest bank to offer its customers services abroad, one of the trends that have been gaining strength in recent years in the country’s financial market.
The transaction will take place in two stages. At first, Itaú will pay 493 million reais ($92.3 million) for 35% of the social and voting capital of Avenue Holding, of which 160 million reais ($29.9 million) will be invested in the brokerage, and the remainder through a secondary acquisition of shares. After two years, the bank will buy 15.1% for an amount to be determined from a predefined adjusted revenue multiple, totaling a 50.1% stake.
Five years after the closing of the first stage, Itaú will be able to exercise a call option to acquire the remaining stake held by Avenue’s current shareholders.
Founded in November 2018 by Roberto Lee, Avenue is a digital brokerage that operates in the B2C and B2B spaces, focusing on retail and high-income retail investors. It is considered the pioneer in this segment in the country, as the service was previously only available to clients in the private and wealth management segments.
Avenue currently has 492,000 accounts and a base of 229,000 active customers, with more than 6.4 billion reais ($1.19 billion) in assets under management, and is considered a leader in access to the US financial system for Brazilian retail investors.
In recent years, growing retail investor demand for access to assets such as stocks, ETFs, and funds - and services such as accounts and cards - abroad has led to a gradual increase in this supply, through startups such as Nomad and neobanks such as C6 Bank and Inter.
C6 settled on JPMorgan as a partner a year ago, while months later Inter acquired US digital bank Usend.
“We are constantly building and enhancing our ecosystem [...], building on clients’ needs and focusing on their entire investment journey. The participation in Avenue represents the next strategic step,” said Carlos Constantini, head of Wealth Management Services at Itaú Unibanco, in a statement.
“It is the leading financial services access player in the US market for Brazilians [...] They have identified an opportunity in a line of business that will attract more and more Brazilians.”
“We are announcing our connection to the largest distribution channel for financial products in Latin America, which is Itaú. From this business, even more, Brazilians will be able to access the largest and most complete market in the world,” Roberto Lee, founder, and CEO of Avenue, said in a statement.
According to the statement, the operation, management, and brand of Avenue will continue to operate independently. The deal is pending approval by regulatory authorities.
Translated from the Portuguese by Isabela Fleischmann, a Bloomberg Línea tech/innovation reporter