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Pátria seeks leadership in Latin America after Nasdaq IPO Added in 3/22/2021
After raising funds, the management company seeks to consolidate its presence in the region and launch new private equity products and other fronts.
After 32 years of operation, Pátria took an important step towards internationalization when it went public on January 22nd on one of the world's main stock exchanges, Nasdaq. The $588 million raised should contribute to the company's consolidation in Latin America and expansion of its private equity products and other fronts, says Alexandre Saigh, CEO, Board Member and Founding Partner at Pátria. "We have a three-decade dream of building a leading asset management firm in Brazil, Latin America, and emerging markets," says the executive, in an interview with ABVCAP.
With $14,01 billion in assets under management, Pátria is already among the five largest emerging market managers. To reach the top of the list, it will use part of the amount raised in the IPO, or $326 million, which went into the manager's cash flow via a primary share issue. Another $262 million flowed to the giant Blackstone, that reduced its stake in the company from 30% to 14%.
As part of its growth strategy, Pátria wants to accelerate the launching of assets in its four verticals of activity: private equity, infrastructure, real estate, and credit. On the first front, it intends to focus on the three areas where the Fund is already present: health care, food and beverage, and agribusiness. However, a fourth area is also on the radar: logistics. Moreover, in the long term, the manager is considering expanding its presence beyond Latin America, after possible acquisitions. "In the next five years we should not take steps in this direction, but maybe in ten years," says Saigh.

How does going public on Nasdaq support Pátria's internationalization plan?

New York adds a sense of internationalization and allows us to grow via acquisitions in the future. Having a stock traded in New York is more valuable for a Latin American manager than a stock traded in Brazil or a neighboring country. Pátria has been going international for about 30 years, since we raised the first funds focused in Latin America. We aim to have more and more regional share of assets under management, taking the lead in Brazil, and then in Latin America. At the same time, we also want to be a leader in terms of presence, and that is why we opened offices in Bogota, Colombia; Santiago, Chile; Montevideo, Uruguay; as well as in New York, London, Dubai, and Hong Kong, among other cities. Two thirds, or 70%, of Pátria works in person in ten offices around the world, and 90% of our funding comes from foreign investors.

What areas or business segments are on Pátria's radar for possible acquisitions?

First, to increase our product portfolio in our four verticals: private equity, infrastructure, real estate, and credit. Within these verticals, we have eleven distinct strategies. In private equity, for example, one of the strategies is focused on our main family of funds on consolidation of fragmented sectors. Another strategy in this vertical is to buy relevant minority stakes in listed stocks. In real estate, we have other strategies focused on funds in the residential and logistics warehouses areas. In infrastructure, we have a fund focused on the development area, both from scratch and in a more mature phase. In credit, we have the strategy of a fund that invests directly in medium-sized Brazilian companies. Besides the eleven strategies, we are also considering developing other new ones. There are several new plans that we can start via acquisitions.

Will future acquisitions also help Pátria expand its geographical presence?

Yes, they will. Acquiring other management companies with other products helps us expand our geographic presence, especially in the five main Latin American countries that we focus on:  Mexico, Colombia, Peru, Chile, and Brazil.

In Private Equity, what sectors or areas is Pátria focusing on?

We focus our investments in a few sectors. More than 80% of the investments in the consolidation fund, within the private equity umbrella, are focused on three sectors: healthcare, with more than 50%, and another 30% divided equally between food and beverage and agribusiness. Our vision is to deeply understand a sector. After the IPO, we should keep these three sectors in the running, with a possible fourth area that has attracted a lot of attention, which is logistics.

How do you evaluate the $588 million raised in the IPO?

The outcome has far exceeded our expectations. The $588 million figure is broken down as follows: $262 million went to Blackstone, which sold shares, and reduced its stake in Pátria from 30% to 14%; and $326 million went to Pátria's cash, which issued primary shares. We had planned to raise 20% less than that. But we were able to raise the full amount because our IPO had an exceptionally large demand, more than 14 times the supply. The regulations of the North American stock market allow us to raise up to 20% more than desired through a mechanism called hot issue.

What changes in Pátria's strategy with the stake reduction by the giant Blackstone?

This change comes at a moment when we are able to look at another growth and expansion path. We have a three-decade dream of building a leading manager in Brazil, Latin America, and emerging markets. Our assets under management of more than $14 billion place us among the first five largest emerging market managers. To achieve this leadership, we had to go public to raise this $326 million to finance our growth. We went public for this purpose. Blackstone had a vision of controlling Pátria, which is in line with the strategy in other businesses around the world. In order to pursue our dream of remaining controlling shareholders and seeking leadership in emerging markets, we suggested that they reduce their participation in the IPO because we would not give up the leadership.

When referring to emerging markets, do you also consider expansion beyond Latin America?

If we think about the origin of our dream, the answer is yes, we do. However, in the short term the answer is no. There is a lot to do in Brazil and in Latin America. In terms of assets under management, we are already among the top five in emerging markets, and to reach the top of this metric we do not need to be there in person. This is essentially a financial variable. But, down the road, our vision is to introduce some of our strategies in other countries. It is a very long-term vision. In the next five years we should not take steps in this direction, but perhaps in ten years’ time we will.

 What could be the reason for this great investor appetite towards Pátria's shares?

There is a positive market moment for our industry in Brazil, which is growing in an inflationary control, low interest rates, and economic stabilization environment. In this scenario, investors seeking higher returns are migrating from traditional fixed income to alternative assets. Furthermore, Pátria stands out in Latin America with a highly successful portfolio and performance history. These two factors explain why demand was 14 times greater than supply at the IPO.

How do you evaluate the situation and growth potential of the Private Equity industry in Brazil?

It is an industry that has matured and developed over about three decades. The managers that have survived in this volatile market have incredible skills and they could be anywhere in the world, in terms of financial return capacity. There has been a purge, I mean a consolidation by performance, over the last 30 years. The management companies that have remained have a successful track record and a huge potential to keep growing. In Latin America, where it is difficult to invest and there are few managers, you must seek to be the best.


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