Experian steps into Brazil

By Maggie Urry

Experian on Tuesday agreed to pay $1.2bn to buy a 65 per cent stake in Serasa, the leading credit bureau in Brazil and the fourth largest worldwide.

Don Robert, Experian’s chief executive, said, “we’ve had our eye on the company for years. It’s the last great prize in our industry in the world.” He said the deal would be neutral for earnings in the first full year of ownership, to March 2009, and earnings enhancing thereafter.

Serasa, which is owned by a consortium of Brazilian banks, had been contemplating a flotation and Experian made its approach after the Brazilian group filed registration documents. Serasa has a 60 per cent share of the Brazilian market, and holds 161m consumer credit records and has data on 5m businesses. The population of Brazil is 190m.

Experian, itself floated off by GUS, the retailer, last October, was already the largest credit information group in the world, with leading positions in the UK and US. It has been actively making acquisitions and also setting up businesses in markets, such as China, India and Russia where credit checking is a nascent industry.

Mr Robert said in many emerging markets the industry is “just beginning to get going,” but the risks were “the same as in other parts of the world.”

He said the group would pay for the Serasa stake from its existing resources. The group has said it aims to spend $600m to $700m a year on acquisitions. Last year it spent only $82m, leaving it with the resources to spend up to $1.4bn in the current year, the group said last month. This year it has already paid $240m for Hitwise, an online marketing company.

Next month Experian expects to buy a further 5 per cent stake in Serasa from some of the other banks which own its shares. After that there will be six large banks holding the outstanding 30 per cent. Mr Robert said these banks were some of Serasa’s biggest customers. “It’s a fantastic situation – having our largest clients as committed partners.”

Serasa had revenues of $313m and profits before interest and tax of $71m in 2006. It is expected to increase sales in 2007 by 20 per cent while margins are expected to improve.

Mr Robert said the price Experian was paying was justified by the fast rate of growth expected in the Brazilian credit market, where use of consumer credit is lower than in more mature countries, and the mortgage market has barely begun to be developed.

As well as expectations of market growth, Experian expects to introduce its other products to Serasa’s portfolio such as its credit scoring and portfolio monitoring systems.

Experian and the minority shareholding banks have agreed put and call options beginning after five years and continuing for five years, but Mr Robert said Experian had no plans to increase its holding in Serasa to 100 per cent.

Experian shares rose 3p or 0.5 per cent at the open to 592p.