UPDATE 2-Brazil's BTG Pactual gets full Banco Pan control in retail push

(Adds details on the deal, background)

SAO PAULO, April 6 (Reuters) - Brazil’s Banco BTG Pactual SA has agreed to buy state lender Caixa Economica Federal’s stake in Banco Pan SA for 3.7 billion reais ($653 million), it said in a securities filing on Tuesday, reinforcing its footprint in the retail segment.

The deal underscores how BTG, once known as an investment bank, has widened its stance in the Brazilian market. Using different brands, it serves clients ranging from low-income individuals to large companies and wealthy families, just like its bigger peers Itau Unibanco Holding SA, Banco Bradesco SA and Banco Santander Brasil SA .

BTG Pactual has been the co-controlling shareholder in Banco Pan, a mid-sized lender, since 2011. Now it is acquiring Caixa’s 49.2% voting stake, equivalent to 26.8% of Pan’s capital. BTG will pay 11.42 reais per Banco Pan common share. Preferred shares in Banco Pan soared roughly 10% and were trading at 12.61 reais on Tuesday morning.

With the transaction, Caixa completes the divestiture of its stake in Pan for a total of 4.4 billion reais.

Caixa had already sold its preferred stake in Banco Pan in two share offerings in 2019 and 2020 and was mulling a new follow-on to divest its common shares. All deals included, Caixa has reaped a profit of 2 billion reais with Banco Pan.

Caixa will continue to provide a long-term funding line for Banco Pan after the deal, one source close to the deal said, speaking on condition of anonymity.

With deep pockets after two follow-ons to raise fresh money in the last 10 months, BTG’s tier one capital ratio will remain at roughly 14%, this source added. Still, few cost synergies are expected.

Banco Pan offers credit cards, payroll loans, auto loans and free digital accounts to low-income individuals.

BTG is likely to have more freedom to implement a growth strategy at Pan, which ended 2020 with 38.5 billion reais in assets. Banco Pan plans to expand its online presence, competing with Banco Inter SA and General Atlantic-backed Neon, and launching loans to micro entrepreneurs, this person added. ($1 = 5.6639 reais) (Reporting by Carolina Mandl and Tatiana Bautzer Editing by Jason Neely, David Goodman and Jonathan Oatis)