SAO PAULO (Reuters) -Brazilian investment bank BTG Pactual announced late on Monday a binding proposal to incorporate shares of Banco Pan, offering a significant premium to minority shareholders in a move that would make Pan its indirect wholly-owned subsidiary.

WHY IT'S IMPORTANT 

The deal represents a significant consolidation in Brazil's banking sector, combining BTG Pactual's investment banking prowess with Banco Pan's retail banking operations, and potentially creating a more diversified financial institution with enhanced operational synergies.

BY THE NUMBERS 

The deal values Banco Pan's preferred shares at a premium exceeding 30% above current market price. Under the exchange ratio, shareholders would receive 0.2128 BTG Pactual units for each Banco Pan preferred share. Each BTG unit consists of one common share and two class A preferred shares.

KEY QUOTES 

"The operation allows for simplification and optimization of the administrative and corporate structure of the economic group to which the companies belong," BTG Pactual said in a regulatory filing.

CONTEXT 

The transaction is expected to be completed within the 2025 fiscal year. The deal follows BTG Pactual's recent increase in its stake in Banco Pan to 55.4% of the lender's non-common shares earlier this month, signaling a strategic move to strengthen its retail banking presence.

The deal would still require approval from Brazil's central bank and shareholders of both institutions. Shareholders of both Banco Pan and BTG Pactual would have withdrawal rights under Brazilian corporate law.