Sale of $29 billion in Brazil government assets hinges on BNDES spat: sources

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By Tatiana Bautzer and Rodrigo Viga Gaier

SAO PAULO/RIO DE JANEIRO (Reuters) – The sale of some 120 billion reais ($29 billion) worth of shares owned by Brazilian development bank BNDES has snagged on a dispute among the bank’s executives, three people with knowledge of the matter told Reuters.

On Friday, BNDES director Andre Laloni requested a temporary leave after clashing with staff over a share offering of state-controlled bank Banco do Brasil SA (SA:) set for Thursday, the sources said on condition of anonymity.

BNDES did not respond to a request for comment. Laloni declined to comment.

The dispute within BNDES adds to doubts about how quickly Brazil can follow through on the bold privatization plans of Economy Minister Paulo Guedes as he tries to reverse more than a decade of government investments in “national champions.”

Laloni got the BNDES job in July after managing the sale of around $3 billion in assets owned by Brazilian state lender Caixa Economica Federal.

At BNDES, the former UBS Group AG (S:) banker was tasked with managing sale of stakes owned by the bank in firms such as meatpacker JBS SA (SA:), oil company Petroleo Brasileiro SA (Petrobras) (SA:) and miner Vale SA (SA:).

For the Banco do Brasil shares, staffers resisted the sale of stakes managed by BNDES through a follow-on offering, arguing that such a transaction generates fees for investment banks and would result in a discount to listed prices, the sources said.

The BNDES staffers pushed to sell the stakes through the bank’s own equity desk in Rio de Janeiro, according to sources. In a presentation to the board, Laloni defended the use of follow-on offerings, citing data from recent stake sales suggesting better returns even after fees and discounting.

Laloni also faced resistance in trying to scrap an internal BNDES rule that equity stakes should be sold at a valuation based on discounted cash flow, even when a company is listed on the stock exchange. The rule has complicated major transactions such as the sale of 50 billion reais worth of Petrobras.

The plans to sell Banco do Brasil shares managed by BNDES fell apart last week after Laloni clashed in a meeting with the development bank’s general counsel, according to sources.

BNDES Chief Executive Gustavo Montezano decided the sale should be approved by all directors. Laloni asked for a leave of absence.

It is unclear whether Laloni will return to his post at the bank or if the government intends to change the internal rules, the sources added.

Montezano did not reply to a request for comment sent through BNDES press representatives.

Although BNDES staffers and prior chief executives have said publicly that much of its equity portfolio is “mature” and should be sold, former CEOs Joaquim Levy and Maria Silvia Marques did no managed to sell significant stakes.

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