On Oct 31, Itau Unibanco Holding SA ITUB announced that it has entered into an agreement to acquire Zup IT Servicosin a span of four years for about R$ 575 million. With this acquisition, Itau Unibanco seeks to accelerate development of digital transformation projects offer new functionalities and digital products to its customers.
Founded in 2011, Zup is a consultancy company offering technology solutions. With more than 900 employees, it has systems that facilitate the integration of new digital developments using legacy corporate systems.
Per the terms, the purchase of 100% capital stock of Zup will be done in three parts. In the first part, Itau Unibanco will acquire 51.0% of the total and voting capital of Zup for about R$ 293 million. In the second phase, Itau Unibanco will buy a further 19.6% equity interest and finally in the fourth year, it will acquire the remaining interest of shareholders.
Notably, Zup will continue to run its business in a separate and autonomous manner, thereby preserving its principles and values.
Itau Unibanco remains focused to undertaking inorganic growth strategies. In August 2018, it received consent from the Central Bank of Brazil to execute investment in XP Investimentos S.A. (XP Holding), which was announced in May 2017. With this acquisition, Itau Unibanco reiterated its commitment to the Brazilian market, and its aim to create long-term shareholder value.
Itau Unibanco seeks to build strategies and undergo digitization to expand operations in Brazil and abroad. However, regulatory headwinds in the domestic country and intense competition remain concerns.
Shares of Itau Unibanco have lost 1% year to date against 5.7% growth registered by the industry.
Itau Unibanco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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