XP investimentos announced on Friday the signature of a binding agreement for the incorporation of up to 100% of Banco Modal, which will be paid with up to 19.5 million new shares of XP Inc., a 35% premium over the average price of the last thirty days of Banco Modal.
According to XP, the companies will carry out the transaction through a corporate reorganization that will result in the incorporation, by a subsidiary of XP Inc., of up to 100% of the share capital of Banco Modal. If Banco Modal does not obtain the necessary approvals to implement such reorganization, including the approval of its minority shareholders, XP Inc. will incorporate participation equivalent to 55.7% of Banco Modal’s share capital held by its controlling shareholders in a stock transaction and will guarantee to all minority shareholders of Banco Modal the right to sell their participation under the same conditions.
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The idea is that, with the agreement, the companies can increase competitiveness in the Brazilian financial market. In September 2021, XP and Banco Modal together had 3.8 million active clients, while the five largest Brazilian banks added 457 million total clients with banking relations and 175 million clients with credit operations, not excluding double counting. In terms of Net Revenue, in the last twelve months until September, XP and Banco Modal totaled BRL 11.8 billion versus BRL 427 billion generated by the five banks in the country, according to XP.
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XP Inc. CFO Bruno Constantino said in a press release that XP’s ecosystem has demonstrated its cross-sell capability and that it expects a better customer experience and increased transaction revenues. “In addition, with greater scale and pricing power, we expect to continue benefiting our clients through price reductions, as we recently did with online brokerage fees.”