Magazine article SourceMex Economic News & Analysis on Mexico

Bancomer Board of Directors Approves Merger with Spain's Banco Bilbao Vizcaya Argentaria

Magazine article SourceMex Economic News & Analysis on Mexico

Bancomer Board of Directors Approves Merger with Spain's Banco Bilbao Vizcaya Argentaria

Article excerpt

In mid-June, the board of directors of Grupo Financiero Bancomer (GFB) unanimously approved a merger with Spain's Banco Bilbao Vizcaya Argentaria (BBVA), thereby rejecting similar overtures from Mexican rival Grupo Financiero

Banamex- Accival (Banacci).

BBVA won the bid by sweetening its offer for GFB to US$1.4 billion from the original bid of US$1.2 billion submitted in March (see SourceMex, 2000-03-15). Under the revised bid, BBVA could add another US$1.1 billion to the deal through future debt issues and capital injections.

"The board's recommendation is the best option for GFB from a strategic and value-creation point of view," said Bancomer president Ricardo Guajardo in comments to banking- industry analysts.

The ownership proportion remains unchanged from the March bid, with Bancomer shareholders receiving a 70% share of the merged company. BBVA plans to eventually acquire another 10% share from the Bancomer shareholders.

BBVA sources said Bancomer's current foreign partner, the Bank of Montreal, will probably not participate in the merged institution. The Canadian bank owns about 16.6% of GFB.

The Spanish bank plans to take administrative control of the new institution, although Guajardo will remain as president of the merged bank.

Shareholders, scheduled to meet June 29, are widely expected to approve the GFB board's decision to merge with BBVA. The merger will go into effect July 1.

The GFB board had been considering BBVA's original bid when Banacci presented a more lucrative offer of US$2.4 billion to US$2.8 billion in May (see SourceMex, 2000-05-10). The emergence of the Banacci offer forced GFB to delay a decision on the BBVA bid to give company officials ample time to consider the two merger proposals.

Bancomer rejects similar overture from Banacci

But GFB decided to accept the BBVA offer because the Spanish bank was offering hard money, economists said. Banacci's offer, in contrast, was dependent on future asset sales, bond issues, and joint ventures.

In a statement, Banacci officials said the bank respected GFB's decision "not to accept our invitation to create the largest financial group in Latin America."

There were concerns about the possibility that Mexico's anti-monopoly agency (Comision Federal de Competencia, CFC) would reject a potential GFB-Banacci merger, since this would have given one bank too much control over Mexico's financial sector. …

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