Qatar’s direct investment vehicle reported Monday it had acquired a 5 per cent shareholding in Spanish Bank, Santander’s Brazilian unit. Qatar Holding, the direct investment vehicle for the Gulf state said it had bought the 5 per cent stake in Banco Santander’s Brazilian unit for an estimated $2.7 billion. Banco Santander is Spain’s largest bank and the investment will see it sell the Qatar firm mandatory convertible bonds equivalent to 5 per cent of the share capital of Banco Santander Brazil.

The exchange price for the three-year bonds will be 23.75 reais ($14.22) per share. According to Santander, the bonds pay a yearly coupon of 6.75 per cent. The Bank expects the sale to enable its Brazil unit to attain its commitment of having a free float in the stock market of 25 per cent by the end of the year 2014. The deal is expected to be concluded by the end of this month, and Barclays Capital is acting as exclusive financial adviser to Qatar Holding.

Hussain Ali Al-Abdulla, vice chairman of Qatar Holding said the acquisition accomplishes the firm’s goal of increasing its exposure to fast-growing emerging markets like Brazil, after its earlier investment in China during the summer. This will further diversify Qatar Holding’s portfolio’s geographical coverage, this time to Latin America, he said.

Santander will chose whether the bonds are converted into old or new shares in Banco Santander Brasil, after three years, with a conversion price of 23.75 Brazilian reals per share, Spain’s largest bank said. The bonds have an annual yield of 6.75 percent in dollars until the conversion date.

Qatar Intermediate Industries Holding Company Limited (Qatar Holding) is a fully owned affiliate of Qatar Petroleum. It was established by an Emiri decree on 29th December of 2005, with a mandate to establish and operate intermediate and other industrial projects, individually or jointly with other partners. At the turn of the 21st Century, there was an economic and social need for intermediate industries in Qatar.

Qatar Holding was established to encourage dynamic, market-oriented, local-international partnerships and joint ventures. It now seeks to promote its experience and expertise to a broader array of audience and a vaster client base, thus actively promoting intermediate industrial projects within the State of Qatar.

Qatar will not be Santander’s only backer from Middle East. Aabar Investments, controlled by Abu Dhabi, bought $328 million of shares when the Brazilian unit went public last year.

19 Oct 2010.