In the 11^th of August, a Monday, in the eve of the publishing of Itaúsa's quarterly balance sheet, the CEO, Alfredo Setubal, and the CFO Priscila Grecco, were getting ready to rehearse the presentation they would make to investors the following day. The ritual is commonplace for publicly traded companies. But, in Itaúsa’s case, the publication of results is an event of great proportions: It involves wide stages, illumination, and filming crews for livestreaming, videocast recordings, and many highlights for social media.

All communication is designed to reach with accessible language all its 980.000 investors, the vast majority individual people, which grants it the second largest shareholder base among the B3 (the São Paulo stock exchange) companies, second only to Petrobras.

With a total of 45 million views in their YouTube videos, with over 160.000 in Setubal’s analysis of the quarterly results alone, Itaúsa has reached unlikely levels of popularity for a holding which had no activity of its own until recently.

The vehicle existed only to retain the equity interests of Itaú Unibanco, which holds 37,7% of capital, and of wood panel and sanitary wares manufacturer Dexco, with 37,8% - both also listed in the stock.

The change of level of Itaúsa’s shareholders came in 2020, when, mid-pandemic and low interest rates, more Brazilians started investing in variable income, and the number of accounts that invest in B3 doubled from 1.6 to 3.2 million.

With fat dividends, being one of the main attractors for individual investors and the mainstay of the Itaú brand, Itaúsa hitched a ride in the rising movement and saw its base rise from 367.000 to 886.000 investors. While many other companies also saw their bases rise during the period only to see interest wane years later, Itaúsa’s haven’t even with interest rates in Brazil at 15% per year.

Today, there are 6 million accounts eligible to invest in the Brazilian stock market, and one in every six does so in the company, which has at least one investor in 93% of Brazilian municipalities. (Those that joined in 2020 can’t complain: their return was 103%, considering also their earnings, while Ibovespa was 46%.)

The sharp rise in the popularity of Itaúsa’s stock is just one of the facets of a much deeper transformation in the company, which just hit its 50th anniversary. Through most of these anniversaries, Itaúsa was no more than a paper company, whose function was to distribute dividends and manage bills. In the last decade, however, it sprang into an intense life of its own.

Since 2017, there have been around R$ 11 billion Brazilian reais in investments, which reached far beyond the banking sector into a relevant presence in infrastructure as well, which make up in the portfolio a slice of 8.5% in the NTS gas duct network; 48.9% in the Copa Energia, leader in liquified oil-based gases; 12.9% in Aegea, the largest private sanitation company in the country; and 10.3% in Motiva, former CCR, which deals with highway concessions and mobility in general.

One of the first investments in this new stage, still in 2017, was a rare incursion in the consumer goods sector, with a purchase of 29.5% of shares of Alpargatas, owner of the Havaianas slipper brand, which granted it joint ownership with the Moreira-Salles family, their bank associates.

Easygoing, Alfredo Setubal – the sixth son of Olavo Setubal, banker considered responsible for the culture and consolidation of Itaú – justifies straightforward diversification. “In 2008, Itaú merged with Unibanco. In 2015, we bought the Citi retail, and the Central Bank said, “Bye-bye. I don’t want to see you purchasing anyone else around here again,” And that’s why we failed to acquire XP next”, he tells.

“It was clear that the bank could no longer grow through acquisitions, but it was still doing so organically and increasing the influx of dividends to the holding. And what do we do with it? We diversify.” The basis for the movement, however, was set much earlier, in 2005, when Dr. Olavo, then 82 years old, hired McKinsey consulting to conduct a governance job in the family holding, which unites the Setubal and the Villela.

(Genealogic note: The families are “cousins” and have as a common origin Alfred Egydio Souza Aranha, Olavo's uncle and the person who kick-started the group by establishing the Central Credit Bank, in the 1940s. Duratex was founded in the 50s by Eudoro Villela, Alfredo Egydio’s son-in-law.)

Back to their roots

“Among many decisions, one was particularly fundamental: to grow, even having capital, the bank must once again open its doors to new business partners”, tells Itaúsa’s CEO. It was a return to their roots. The biggest private bank in Latin America, Itaú, was formed from the union of many other banks over its history, eventually merging its partners into itself.

“At the time, it was more a matter of need than of strategy; we didn’t have enough capital”, jokes the CEO. However, this created an associative culture that values the new skills acquired from other institutions, and it prevailed even after money had become a non-issue.

It was this seminal work of Dr. Olavo that led to the merger of Itaú and Unibanco, in a joint control structure with Moreira-Salles, which ended three months after his death in August 2008. This also defined how Itaúsa would act beyond its financial DNA: always with minority investments, with operating partners that knew the business well and accommodating improvements in their processes and governance.

Anchored in Itaú, a giant with nothing less than R$ 370 billion in market value, new investments had to be relevant to move the diversification marker. It was eventually pacified, since in 2015, checks had to be worth at least R$ 1 billion, or 1% of the total value of Itaúsa’s shares in Itaú and Durex at the time.

“We moved into infrastructure, which is a more capital-intensive sector, in part because of this ticket”, affirms Fred Pascowitch, who arrived at the company in 2016 to take the recently-created office of Investment Director and Portfolio Management. “But we didn’t get into greenfields [projects which are built from nothing]. We sought companies that could generate profit and were looking for a partner to climb a level.”

In this sense, maybe the most emblematic investment is Copa Energia. Formerly Copagaz, the company left profits of around R$150 million in 2020, the year they joined Itaúsa, to over R$1.1 billion last year. The entrance of the holding, with a R$1.2 billion share for 48.9% of capital, came in a transformational moment: the purchase of Liquigás, then market leader in GLP, by Copagaz, with only 8% market share at the time.

“It’s a gigantic change to leave a familiar company, with leadership models deeply rooted in family, to another company that is many times larger. We established a council with a well-defined vision which helps the company to develop”, says Pascowitch.

Pedro Turqueto, CEO of Copa Energia, backs the idea. “I’ll be honest: in the beginning. I felt like I was committee hopping”, says, referring to the newly created advisory bodies, which came with the new structure. “But, with time, one realizes how important it is to be assertive, for the council to take decisive and well-grounded decisions, and to swiftly change courses should things not go as expected.”

Aegea, the sanitation company, joined in 2021, before the company took control of some of the concessions that belonged to Cedae in the city of Rio de Janeiro, and reached new heights. “In the process of attracting another business partner, besides capital, Itaúsa’s legacy and an eye for risk evaluation were pivotal: Does it make sense to enter this project? They had already gone through this many times since banks went private”, says Radamés Casseb, CEO of Aegea.

In talks with Alfredo Setubal, who worked in Itaú for three decades, especially in investments, before taking charge of the holding, the experience of various banking M&A’s is clear: “The privatization of NTS [gas ducts network which belonged to Petrobras] held an enormous risk. No one wanted to, but we financed it and everything turned out very well. It was just like the privatization of Banerj [in 1997], which had no other interested party.” The capacity to extract synergy from assets in the face of state-owned companies comes from this era.

The next 50

After five investments in five years, Itaúsa is in a purchasing hiatus. Their last was a share of a little over 10% of CCR, now Motiva, in 2022, for R$2.9 billion – their largest so far. In recent years, the focus was on housekeeping chores: “We were discovering and structuring our own way to support our portfolio,” affirms the CFO Priscilla Grecco, an executive with over 20 years in the group, the first 10 of which were in Itaú, where she left to help shape the structure of this ‘new’ Itaúsa.

“Formerly, contact with investments was very personal, through our council representatives. Today, we have an accompanying structure and processes so that our Itaúsa team can also support them in technical decisions”, she says.

Over the last years, the council of Itaúsa has also transformed. From 8 chairs, today only 4 are occupied by family members. Since last year, the presidency has also been occupied by a member of no such weight: Raul Calfat, who has had a long career in the Votorantim Group and experience in many other councils, from family companies, such as Aché Pharmaceuticals, to publicly traded companies, such as Empraer.

“Itaúsa already had a good governance structure, but we have drastically reinforced committees and processes so that the board had an ever deeper knowledge of investments, beyond Itaú”, says Calfat.

Looking at the next 50 years, Setubal keeps seeing more space to advance in infrastructure, primarily through the investment platform he built. “We make a point of joining companies that can be consolidating in their sectors, and we can eventually contribute should they ever need capital”, he says.

One of the most obvious growth avenues is in sanitation, with Agaea, which has been accumulating concessions and was almost able to make a shareholder offer to Sabesp, which went private last year.

Looking at the short and medium-term, however, high interest rates limit operations drastically, says the executive: “In the next 5 to 10 years, I can’t see this portfolio increasing a lot. I think the interest rates will stay at 15%, maybe a bit less, but won’t drop much. So it is difficult to have meaningful returns”.

Despite family roots, the founder of Deca and Duratex, the industrial sector is off the table. “Today Brazil lost a lot of industry participation, it is a sector that is hardly worth it.” Says Setubal. Not for nothing, investments have a factory component and are also connected to retail, like Alpargatas and Dexco, which have been most challenging in the last few years. Besides infrastructure, what opens Itaúsa’s appetite is agribusiness.

“It is a sector that we’ve been studying, in which Brazil is very strong, representing 25% of GDP. We are looking for something that won’t suffer much from commodity volatility. So far, we haven’t found an alternative. But agribusiness is a very big chain, which also has industry, equipment, logistics, many options.”, he says.

Agribusiness is popular. Now, so is Itaúsa.