(Bloomberg) October 27, 2010 – JPMorgan Chase & Co. agreed to acquire a majority stake in Brazil’s Gavea Investimentos Ltda., the fund manager founded by former Brazilian central banker Arminio Fraga.
Gavea will transfer 55 percent of its operations, including its entire private banking unit, to the New York-based lender, Gavea partner Amaury Bier said today in a telephone interview from Sao Paulo. JPMorgan may acquire a further 22.5 percent within three years, and another 22.5 percent in five, Bier said.

Gavea, which runs private-equity and hedge funds, manages about $6 billion and has 119 employees, according to the firm’s website. JPMorgan will initially pay $270 million, and the total amount may reach $1 billion, Brazil’s Valor Economico newspaper said today, without citing the source of the information. Those prices are “speculations,” Bier said.

“The value will depend on our performance and will go as far as the eye can see, as long as it would be reasonable,” Bier said. “The value of resources managed by Gavea will fall by about $1 billion, which is from private banking, to about $5 billion.”

JPMorgan’s Highbridge Capital Management struck the deal, which is expected to be completed “shortly,” the companies said in a statement today that didn’t disclose terms. Economists project Brazil’s economic growth will more than double that of the U.S. this year, helping the country attract so much capital the government imposed taxes on foreign investors to stem a currency rally.

‘Direct Exposure’

“Gavea will provide Highbridge with greater macroeconomic insight and direct exposure to investing in Brazil,” said Glenn Dubin, chief executive officer of Highbridge, in the statement.

Gavea, founded by Fraga in 2003, has offices in his native Rio de Janeiro and Sao Paulo. A former fund manager for billionaire George Soros, he has been in talks with the bank since at least February, a person with knowledge of the negotiations said at the time.

U.S. banks are expanding internationally to tap faster- growing economies. Brazil’s gross domestic product is forecast to jump 7.1 percent this year, according to the median estimate of 21 economists surveyed by Bloomberg. That compares with 2.7 percent for the U.S., based on estimates from 65 economists.

International Expansion
International sales and service have been more profitable for JPMorgan, which derived 24.5 percent of net revenue from overseas markets last year and 61.6 percent of profits. In February, it expanded its global commodities-trading unit by agreeing to purchase parts of RBS Sempra Commodities LLP for $1.7 billion. That same month, the bank said it plans to double a 4 percent share of the Asian market over the next few years.

CEO Jamie Dimon, 54, has also made expanding in the emerging markets of Brazil, Russia, India and China a priority by appointing Heidi Miller to the new position of head of JPMorgan International in June.

The bank has a “good presence” internationally, Miller said when she took the job. “The question is, can we accelerate growth plans in Asia, can we accelerate what’s going to be growth in emerging Europe and Latin America?” she said. “That’s our goal.”

Fraga, 53, was central bank president from 1999 to 2003. He named his fund after a Rio de Janeiro neighborhood that is partially covered by tropical rain forest and is home to Brazil’s only urban national park. He is a member of JPMorgan’s International Council, which advises the bank on global business.

By Adriana Brasileiro and Adriana Chiarini