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Brazil's antitrust watchdog Cade recommends approval of Itau-XP deal

Brazilian antitrust watchdog Cade's superintendent of competition has recommended that the regulator approves Itaú Unibanco Holding SA's acquisition of a 49.9% stake in the brokerage firm XP Investimentos SA as long as the parties comply with all the terms they have agreed to.

In an official statement, Cade said a number of "competition concerns" arose from the deal regarding XP's "disruptive" business model regarding the open nature of its investment platform which allows for a multitude of products from different suppliers. However, the regulator said the arrangement of the transaction took away most of the concerns.

"The acquisition of equity interest, Itaú's limited power over XP and the terms of payment of future installments of the acquisition, significantly limit Itaú from impairing market competition through this operation," Cade said.

Moreover, both parties agreed to additional measures to limit Itaú's influence on XP's business. The agreement further convinced Cade to green light the acquisition. "[Not] only were accords negotiated that limit the influence of Itaú over XP's commercial decisions, but the parties are committing to adopting practices in relation to their commercial partners... that facilitate the access of competitors," the superintendent said.

In May, Itaú, Brazil's biggest bank, agreed to buy the stake in XP Investimentos, representing 30.1% of the brokerage firm's voting shares, for about 6.3 billion Brazilian reais. At the time, XP was present in 130 Brazilian cities, in addition to offices in New York, Miami, London and Geneva. It had 850 employees and held 85 billion reais in assets under custody and 12 billion reais in assets under management.

As of Dec. 27, US$1 was equivalent to 3.31 Brazilian reais.