By Luciana Magalhaes
SÃO PAULO--Founders of Rio de Janeiro-based investment
management firm Gávea Investimentos are in talks with executives at
J.P. Morgan Chase & Co to buy back control of the Brazilian
firm, according to a person familiar with the talks.
Back in 2010, J.P. Morgan, through its hedge fund Highbridge
Capital Management, paid an estimated $270 million for a 55% stake
in Gávea with an option to acquire the remaining 45% over the
course of the following five years.
Earlier this year, the two groups started discussions to review
the terms of the original agreement, according to the person
familiar with the talks. The two firms are now studying an
arrangement which would give the firm's control back to its
founders. The format of the possible deal hasn't been set and there
is no guarantee an agreement will be reached, according to the
person.
Gávea was co-founded in 2003 by Arminio Fraga, the former head
of Brazil's central bank. Gávea had BRL18.1 billion ($5.8 billion)
in assets under management as of February, according to the firm's
website.
Mr. Fraga, who managed funds for George Soros in the 1990s,
became Brazil's central bank chief in 1999 after the country
devalued its currency.
The economist was a senior adviser to opposition candidate Aécio
Neves in last year's presidential election, and had been tapped for
finance minister in the event Mr. Neves won the presidency. But Mr.
Neves was defeated by President Dilma Rousseff in one of the most
competitive elections in Brazil's history.
It would make sense for Mr. Fraga to turn his full attention
back to Gávea, according to Luis Santacreu, a financial sector
analyst at local rating agency Austin Rating.
For J.P. Morgan, meanwhile, renegotiating control with the
Brazilian partners would be a way to retain Gávea's current staff,
the analyst said.
Brazil today faces several challenges, including a stagnant
economy and high inflation, which has reduced the appetite for some
international firms to invest in the country. When J.P. Morgan
bought Gávea, the country was growing at a 7.5% rate. Now Brazil is
teetering on recession.
That could be another reason to make sure Mr. Fraga and his team
won't move on. " Times like this require higher ability to do
business," Mr., Santacreu added.
Write to Luciana Magalhaes at Luciana.Magalhaes@dowjones.com
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