Citigroup and U.S. Bancorp have inked a pact to offload their joint venture in a Brazilian card payment processing unit, Elavon do Brasil.
The terms of the deal were not disclosed, reported Reuters. However, the months of negotiations over the deal seem to have ended. Both companies confirmed the transaction on Friday (April 22), but no quantitative details were released. The identity of the buyer, Stone Pagamentos SA, which is based São Paulo, was disclosed. U.S. Bancorp has a 50.9 percent stake, and Citi holds the remainder. The firm was losing money for quite some time during the five years that the two banks held their stakes. Elavon never really gained traction in the payments processing market, with a worldwide market share of 2 percent and only coming in fourth among Brazil’s processors.
In some details that were disclosed, Stone has agreed to refill Elavon’s capital coffers and “provide additional funds for growth,” according to the news report, and that would help reverse the negative equity of as much as $56 million that has accumulated on the balance sheet.
The transaction’s wheels were set in motion at the end of last year when Citi did not add additional finances to Elavon to help the balance sheet, and Reuters reported that the relationship between Citi and U.S. Bancorp “soured” thereafter. Citi, for its part, had been moving out of Brazil in the wake of retail banking losses and also heated competition within that country.
Reuters said that, according to a source, Stone is controlled by an investment firm, Arpex Capital, and one notable Arpex partner is billionaire Jorge Paulo Lemann. Another holder is Banco Pan SA. Lemann has part control over Anheuser Busch InBev, as well as 3G Capital.