Bancolombia Takes Over Grupo Agromercantil, Fitch Calls The Move Credit Neutral

According to Fitch Ratings, Bancolombia’s increased stake in Grupo Agromercantil Holding SA. (GAH) will have no impact on either the ratings of Bancolombia or GAH’s subsidiaries. On Sept. 29, 2020, Bancolombia announced an agreement to acquire full ownership of GAH. Under the agreement, Bancolombia will buy the remaining 40% stake in GAH that it currently does not own. This transaction was approved by the Colombian, Panamanian, Guatemalan, and Barbados regulators.

Bancolombia announced that the amount paid for the transaction was $289.1 million USD. Since 2015, when the buying option was granted to Bancolombia, the bank gradually provisioned the total amount of the transaction, and as a result there has been no additional leverage due to this transaction. Moreover, capitalization metrics will not be affected due to additional goodwill, as this was completely recognized when Bancolombia took majority control of GAH and consolidated the subsidiary on its balance sheet in 2016.

Fitch believes this transaction is in line with Bancolombia’s broader expansion strategy in the region, improves its competitive position in Central America, and demonstrates Guatemala’s importance as one of the bank’s key growth markets. Moreover, as the acquisition will not have an impact on the bank’s financial profile, it will not affect Bancolombia’s ratings.

Banco Agromercantil (BAM), Financiera Agromercantil and Mercom Bank’s ratings are based on the potential support these entities would receive from their shareholder Bancolombia. The transaction also reinforces Fitch’s opinion on Bancolombia’s propensity to support its subsidiaries should it be required. Fitch does not expect any changes in GAH’s strategy or risk appetite, given that both of these were already aligned to those of Bancolombia as the bank’s majority shareholder. BAM ‘s branding will remain due to its strong recognition in Guatemala.

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