Background on Key Players
Grupo México, led by Germán Larrea—Mexico’s second-richest man—has presented a near-hostile bid for the acquisition of Banamex, intensifying an unexpected bidding war.
Just ten days after Citi announced a sale agreement with Fernando Chico Pardo, Mexico’s eighth-richest man, the pursuit for Banamex has heated up. This high-stakes competition pits two prominent Mexican business titans against each other.
Who are the Key Players?
Banamex, a coveted prize in the Mexican banking world, is being contested by Grupo México and Chico Pardo. The potential deal could be worth around $9 billion.
Contrary to earlier claims that Banamex had lost value and that its delayed sale through markets indicated a lack of interest, the bank is now sought after by two powerful Mexican magnates.
Decision-Making Process
Sheinbaum and Shareholders: The Decision-Makers
The fate of Banamex largely depends on Mexico’s President, Claudia Sheinbaum, who had previously given her approval to Chico Pardo. It remains to be seen if she will endorse Larrea, who was sidelined during the previous administration.
During the López Obrador era, the ex-president imposed several conditions for the acquisition process and eventually declared that the government would purchase it. Shortly after, Citi opted for an Initial Public Offering (IPO) on the markets instead of a direct private buy-out.
In her first year in office, Sheinbaum witnesses this unexpected shift in Banamex’s sale process, where the interests of two prominent businessmen might force a direct buy-out.
For Sheinbaum’s government, having two leading business figures vying for Banamex signifies confidence in Mexico and its six-year administration.
Shareholders’ Role
Ultimately, the decision rests with Citi’s shareholders. They must choose the most beneficial and profitable course of action for their institution.
The Offer: Is it Irresistible?
Initial Reactions
On the day Grupo México’s intentions were made public through Mexico’s Bolsa de Valores, Citi released a statement asserting that they had yet to receive Grupo México’s proposal.
Citi mentioned their agreement with Chico Pardo and maintained priority through this arrangement. However, they stated that if they received Grupo México’s proposal, they would review it and be subject to regulatory approval.
It’s unusual that Grupo México announced its purchase intentions through the Bolsa de Valores’ issuer information service without directly informing Citi.
Larrea’s Offer
Larrea aims for control and proposes to buy 100% of Banamex, making it a predominantly Mexican-owned group. He offers Chico Pardo a 25% stake as a minority shareholder.
Citi and its shareholders face a challenging decision, but pragmatism will likely prevail.
Additional Context: Regulatory Developments
Regulatory Updates in the Energy Sector
On October 3, regulations for six secondary laws within Mexico’s energy sector framework were published.
These regulations, crafted by the Secretaría de Energía under Lourdes Melgar Palacios, govern activities in hydrocarbons, electricity, energy planning and transition, biofuels, geothermal energy, and hydrocarbon income.
The Energy Planning and Transition Law harmonizes sector instruments, ensuring an orderly short-term, medium-term, and long-term development.
The Electric Sector Regulation ensures state dominance in energy generation, regulates permits and authorizations.
The Hydrocarbons Sector Regulation sets requirements and procedures for exploration and extraction activities, specifies standards for mixed development assignments, and ensures traceability across all hydrocarbon value chains.
