UBS AG, Switzerland's largest bank, said Tuesday it will purchase Brazilian financial services company Banco Pactual SA for up to $2.6 billion as part of an effort to expand operations in emerging markets.
UBS said it would pay $1 billion up front, with a further payment of up to $1.6 billion in five years depending on performance.
"Brazil has one of the world's fastest-growing financial markets and therefore is a key focus area for UBS," Chief Executive Peter Wuffli said in a statement.
Banco Pactual, whose main offices are in Sao Paulo and Rio de Janeiro, offers investment banking services for institutional clients in local and international markets. The company's capital markets business is a top tier underwriter of Brazilian equity and debt sales, UBS said.
"This deal is a cornerstone in our strategy to increase penetration in emerging markets within fixed income and equities," said Huw Jenkins, chief executive of UBS' Investment Bank, based in London. Jenkins noted that the investment banking fee pool in Brazil was one of the largest among emerging economies in 2005.
UBS said it will integrate Pactual into its investment banking, wealth management and asset management businesses, making the combined entity the foundation of its operations in Brazil.
The bank also said it would establish a retention pool of up to $500 million in UBS shares for Pactual and UBS employees, beginning five years after the deal is closed. It expects to complete the acquisition in the third quarter of this year.
Pactual Asset Management had $18.6 billion under management as of March 31, while the wealth management arm oversees a further $4.6 billion for high net worth individuals, UBS said.
The move comes a month after UBS announced it would buy the U.S. private client branch network of Piper Jaffray Cos. for $500 million in cash, expanding its wealth management business in the Midwest and western United States.
UBS shares fell 0.2 percent to 150.30 Swiss francs ($122.70) in Zurich trading.