AMLO interferes and Larrea recoils: Why did the purchase of Banamex by Grupo México fail?

Citigroup Inc announced Wednesday that it will make an initial public offering (IPO) of shares of its Banamex unit, which comprises consumer businesses, small businesses and banking services to midsize companies in Mexico, after it the sale of the business failed to a major mining conglomerate.

The giant Grupo México, of the tycoon German Larreahad been in talks to buy Citibanamex, a source close to the matter told Reuters earlier this month.

In mid-May, amid speculation about the cancellation of the agreement, Mexican President Andrés Manuel López Obrador said at a press conference that there were no problems for Mexico Group buy the unit.

However, a decree published days later ordered the occupation “temporary” of a section of railway controlled by Mexico Groupwhich scared off investors and made it difficult for government-company talkssaid the mining conglomerate.

In his most recent intervention on the subject, López Obrador said on Tuesday that if the purchase of the retail business of Citigroup in the country did not materialize, his government could participate in an acquisition, although he added that the bid, led by the conglomerate Mexico Group“I was on the right track”.

However, since Monday some media echoed rumors that ensured that Larrea had given up buying citibanamex accusing lack of legal certainty after the Government occupied said railway section. Mexico Group told Reuters on Tuesday that the accounts were false. “Regarding the process with Citibanamex, there is a confidentiality agreement signed between the parties and we are not in a position to comment“, held.

“Later it was found out that it was a lie, but I was even happy because I said: ‘if he (Larrea) is not going to buy it anymore, then there is a possibility of creating a public-private association’”, said the president yesterday in his morning press conference.

“The people of Mexico would be interested in having shares and the Government would put the same amount in order to have a majority and there is no loss because it is a round businesshe added Lopez Obradorknown by its acronym AMLO.

citi it had announced plans to divest the unit more than a year ago as part of a strategic review by chief executive Jane Fraser to exit 14 consumer banking markets in Mexico, Asia, Europe and the Middle East.

Now, the company expects the initial public offering to be completed in 2025.

“After careful consideration, we have concluded that the optimal path to maximize Banamex’s shareholder value and further our goal of simplifying our company is to move from our two-pronged approach to focusing solely on an IPO of the business.“, said Fraser it’s a statement.

The recent complications in the sale process weighed on the decision, including lawsuits from the Mexican government and other factorssaid a source with knowledge of the matter.

Banamex was acquired for US$12.5 billion in 2001, while the latest negotiations valued it at around US$7 billion.

The proposal of Mexico Group he had outbid the Mexican Mifel Bankof Daniel Becklerand also the last two bets for the retail banking unit.

Citigroup first announced in January 2022 that it would be leaving Mexico, ending its 20-year retail presence in the country and sparking an extended bidding phase.

In addition to the possible weakening of the business, citi it also has to deal with restrictions placed on the deal by the López Obrador government, including a ban on mass layoffs.

In February, Fraser met with the Mexican president, amid the bank’s attempt to complete the sale of its local unit.

Following Wednesday’s announcement, shares of citi were trading down 3.2% after the New York market opened, at $44.40.

On the other hand, the titles of Mexico Group they shot up more than 6.3% in the stock market of the Latin American country.

Source: Reuters