By Joshua Franklin
ZURICH (Reuters) - EFG International (S:EFGN) has agreed to buy Brazilian financial company Grupo BTG (L:BTG) Pactual SA's Swiss private bank BSI for 1.33 billion Swiss francs (£937.98 million) in cash and shares, a deal it hopes will propel it into the top five in Switzerland's crowded wealth management market.
The sale comes just five months after BTG completed the acquisition of BSI but was borne out of a need to raise cash after the arrest of the Brazilian bank's billionaire founder André Esteves last November.
EFG expects the combination to make it the fifth-biggest private bank in Switzerland behind UBS (VX:UBSG), Credit Suisse (VX:CSGN), Julius Baer (VX:BAER) and Pictet.
It had been the 12th-biggest player in a market where many expect to see consolidation as smaller banks struggle under increased regulation and an erosion of Switzerland's cherished bank secrecy laws.
"We are offering our shareholders attractive prospects, and the transaction is in the best interest of the Swiss financial centre," EFG International Chief Executive Joachim Straehle said in a joint statement with Lugano-based BSI on Monday.
Zurich-based EFG will pay 975 million francs in cash, with BTG also getting a roughly 20 percent stake in EFG as well as representation on its board of directors.
The shares would make BTG EFG's second-biggest shareholder behind EFG Group, which is controlled by Greece's billionaire Latsis family. EFG Group's stake is expected to fall to over 35 percent from more than 50 percent.
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The price is around 1.5 percent of BSI's 88 billion francs in managed assets, with the typical price for such deals seen at around 1.5-2 percent.
The purchase price will change based on net new money and changes in tangible book value by the time the deal is closed, which is expected by the end of 2016.
EFG will fund the deal by raising 500 million Swiss francs in equity and 250 million in Additional Tier 1 capital instruments.
EFG also released 2015 results ahead of schedule showing a 57.1 million Swiss franc profit.
Two sources had told Reuters last week that Sao Paulo-based BTG was in talks to combine BSI with EFG in a transaction that could be announced as early as this week.
The sale furthers BTG's plan to raise cash and restore investor confidence in the wake of Esteves' arrest. He was the architect of BTG's purchase of BSI, which he said would help the independent investment bank grow beyond Latin America.