Four judicial officials were called by the Prosecutor’s Office on Tuesday for questioning due to the possible irregularities regarding the distribution of the civil lawsuits filed by Grupo Sura and Grupo Argos over the takeover process of Nutresa. The officials summoned to be questioned are Rafael Matos, Civil Judge 5 of the Oral Circuit of Medellín; the administrative assistants Mateo Flórez and Daniela Díaz; and the university professional Carlos Álvarez.

The Superior Court of Bogotá waded into the attempted takeover of Nutresa on Wednesday after it said that Nutresa’s recusal of the director of Corporate Jurisdiction I of the Superintendence of Companies, José Nicolás Mora, over his role in the takeover bid.

The Gilinski family already owns several businesses in Colombia

The attempt to disqualify Mora was due to his and his wife María Valentina Díaz’s link to the law firm Gómez Pinzón Abogados, which is the advisor of the International Holdings Company (IHC) in Colombia. The law firm had denied two members of Grupo Sura’s board of directors from participating in the analysis of the Nutresa takeover bid.

By Thursday, the Fifth Civil Judge of the Medellín Circuit also decided to allow Grupo Sura to keep the measure that stops the company’s legal representatives from executing orders or decisions that come from a board that has less than four members during the voting, likely a response from the Nutresa takeover attempt in November.

The Gilinski family has sued Nutresa after their attempted takeover bid for the company with IHC in November was not ratified in February due to there not being any quorum when only four members of the board decided to accept the bid that intended to sell shares to the company.

Gilinski’s attempts to take over Nutresa, Sura, and Argos has been going on for years in the apparent end goal of taking over the Grupo Empresarial Antioqueño (GEA). Gilinski’s companies and IHC has failed, however, to garner any significant majority in any of the three companies due to the refusal of the remaining investors to sell any of their shares to Gilinski.

Thus, Gilinski is now in the middle of a lawsuit battle with the remaining investors, one whose outcome for either side remains unclear in the future.

In fact, it is a difficult week for Petro as the job of reforms gets underway; he lost several cabinet ministers, although Alejandro Gaviria (Education) would be the only one that would register on the political Richter scale. The first semester of 2023 was expected to be choppy and it isn’t disappointing. On top of that the Supreme Council has also blocked, for the time being at least, the President’s move to control the energy sector.

With all this, perhaps no surprise to see Petro’s latest approval level drop to 40% in February, from 48% two months ago – who would be a politician?

There was also some very disappointing unemployment data from the DANE. January saw urban jobless rise to 14.5% versus 10.8% in December. The national number also rose to 13.7% from 10.3% last time around. On the bright side when we look at that national number in absolute terms we find that 21.49mn people were gainfully employed versus 20.6mn a year before: an increase of 3.7%. No month can be taken in isolation in a country where 50% of the population work unofficially, but this is a poor number.

In a week when PMI data in China saw the biggest jump in a decade, something which may well benefit Colombia in the medium term, the latest reading for February in Colombia (49.8) was again in contraction territory, although a little better than the 48.5 of January.

The Central Bank had tea and biscuits but offered no update on their opinion of the economy – we will now have to wait until late March to see how far they will be increasing interest rates. The terminal rate expectation is for 13.25%, from the current 12.85%, but it remains to be seen whether that might happen in one hit.

Much will depend on this Saturday’s CPI reading for February – after a better than expected 13.25% last time around, an increase to 13.36% is expected. This would put the MoM reading at 1.66% which would be lower than 1.78% in January.

In corporate news Ecopetrol reported some healthy looking numbers whilst executives from Grupo Argos, Grupo Nutresa and Grupo Sura were in meetings with Abu Dhabi’s IHC who now own sizable holding in the companies. According to the company filings this was part of their regular meetings with shareholders and took place a month ago.

The Peso as expected had a tough week but perhaps not as complicated as anticipated – whilst inversely correlated to DXY the sight of oil prices increasing may have helped.

Wishing you all a good weekend.

Roops

Please find below the LinkedIn Video:

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_colombia-politics-economia-activity-7037387538541465601-lgwT?utm_source=share&utm_medium=member_desktop

The court decision leaves null the decision of the Grupo Sura board of directors in November to accept the takeover bid that Gilinski offered to Nutresa on grounds that the board did not have a legal quorum when the decision was made and finalized, reports Valora Analitik.

The original case was filed by Diego Patiño Moreno, arguing that the decision could only be finalized if all seven of the board members were present, or if people endorsed at the company’s shareholders’ meeting were voting at the proceedings.

The Tenth Civil Court of Medellín had agreed with Moreno’s argument, but one of the Grupo Gilinski’s representatives, former Colombian commerce minister María Ximena Lombana, had argued that the quorum number should have been made with the number of members in the current position and not with the number of positions available.

Judge Piedad Cecilia Vélez of the Superior Court of Medellín ended up siding with Moreno after reviewing all the data of the case.

The battle between Nutresa and Gilinski has been ongoing for months, as Colombian billionaire Jaime Gilinski attempts to leverage his alliance with the IHC in order to take over Nutresa, Grupo Sura, and Grupo Argos, the Financial Times reported.

The takeover attempt by Gilinski escalated throughout 2022, and appear to have the ultimate goal of taking over the informal cross ownership alliance known locally as Grupo Empresarial Antioqueño (GEA), which manages 125 companies and is a significant driver of Medellín’s regional economy. So far, however, neither Gilinski nor the IHC has been able to obtain a clear majority in any of the three companies.

“At the moment, Gilinski…doesn’t control anything,” analyst Daniel Guardiola told Financial Times. “And you don’t invest over $2.5 billion not to control anything.”

The hostile takeover attempts seem to be losing their effectiveness as nearly all of the remaining shares of Nutresa have as a response, been concentrated by GEA allied investors, cross-shareholders between the three companies (Nutresa, Sura, and Argos), and long-time wealthy families based in Medellín that have so far refused to yield to the bids Gilinski has pushed in the country.

The most recent takeover bid that Gilinski and the IHC spearheaded and which was not ratified by the Superior Court could also be seen as a failure as the company fell significantly short of the shares and control they were seeking, getting only 35 million shares out of their goal of 114 million and gaining only 7.71% of the outstanding shares in the process.

The fight between Grupo Gilinski and the GEA seems to be spreading to court, government investigations, as well as the public sphere, as Gilinski’s son Gabriel is being accused of using Gilinksi’s own Colombian newsmagazine Semana to spearhead a smear campaign against the executives of the GEA, Portafolio reported.

Looking back on the week several data points were published – none of which were particularly positive:

Inflation for November was 0.77% – higher than expected, again driven by food which rose 1.5% MoM. This led us to a 12m reading of 12.53% – the highest since March 1999. At this juncture it looks like the Banco de la República will have little choice when it sits down next week but to increase rates from 11-12%. That would be in line with the terminal rate being predicted by analysts in surveys held by entities such as Bloomberg and Fedesarrollo.

Exports for October were so disappointing I was driven to produce a special video. They may have risen FOB 10.9% but that is masking the real situation. Over 90% of that increase was due to coal and the increase in global prices – to highlight that in tonnage terms Coal fell 8% YoY. Oil was an even worse read with a 6.9% drop in dollar terms and 11.1% in tonnage as 11,839 barrels were shipped, down 12.1% YoY.  Expect another ugly trade deficit number when Imports are published.

Remaining with oil for a second, it is worth noting that despite a week in which the black stuff has fallen 10%, the Peso has held up well.

Fedesarrollo released the Consumer Confidence November and at -24.8% it was below both expectations (-21.4%) and October (-19.5%). No one can be overly surprised – the tax reform may now have been completed, which has lowered the political temperature, and the economy may be running strong – but there are enough headlines around pointing to a slowdown in both Colombia and overseas, to worry most people.

Finance Minister Ocampo was discussing the Current Account Deficit this week and felt things are going in the right direction. Whilst Colombia is likely looking at a 7% deficit in 2022, there is the expectation for a Primary Surplus in 2023 – that would equate to a deficit of 4.3%. Looking further out – a figure of 1.7% is expected for 2024.

We started this note discussing the fact that Colombians are on their travels – and we end it noting that a number of Medellin executives from the ‘GEA’ were in Abu Dhabi in meetings with IHC who recently, in conjunction no doubt with the Gilinski group, tendered for a stake in Grupo Nutresa. There are conflicting reports – was it a visit or was it an invitation? No doubt the situation will continue into 2023.

Please find LinkedIn Video Below:

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That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

International Holding Company (IHC) launched a tender offer to acquire between 25% and 31.25% of Nutresa’s shares, paying $15 per share, a stake that is worth up to $2.15 billion. Arab Sheikh Tahnoon bin Zayed Al Nahyan, son of the founder of the UAE, is the owner of the holding company.

This 4th takeover bid of the Nutresa group will start on November 3, open until November 18. However, the bidder may extend this deadline, according to the tender offer. According to Colombian law, the offer is made to every shareholder of the issuer, including Grupo Sura, which now owns 35.23% of Nutresa, Grupo Argos, which owns 9.95%, a few families who have so far declined to sell their shares, and Gilinski himself, who owns 31.09%.

Over the previous nine months, Gilinski has made investments totaling more than $3.5 billion USD in seven tender offers with the help of the Abu Dhabi royal family’s IHC. In less than a year, he has already accumulated 31.09% of Nutresa’s shares in three consecutive tender offers, and 38% of Sura’s shares in three other bids.

This acquisition attempt by IHC is 94.6% greater than Gilinski’s initial offer, 43.1% higher than his second offer, and 23.5% higher than his third offer. After three rounds of tender offers, the London-based Colombian was able to acquire up to 30.8% of the shares that were still in circulation.

He made an initial offer of $7.71 per share, hoping to acquire 162.7 million shares with a participation of between 50.1% and 62.6%. The acquisition price for the second offer, which included 14.24 million shares, was $10.48.

In the third tender offer for the food firm, between 43.9 million and 54.9 million shares, or 9.6% to 12% of the total number of outstanding shares, were sought. Each share required payment of US$12.58. However, after failing to meet the minimum, the Colombian Stock Exchange (BVC) declared it abandoned.

A gateway to GEA

If IHC now succeeds in acquiring the shares of Nutresa through this fourth tender offer, the Arab holding company and Gilinski could gain control Nutresa, then potentially Sura, Argos, and ultimately Bancolombia. To triumph, Gilinski and IHC need to combine their shares in Nutresa. Controlling GEA also means managing the group’s 125 companies.

“IHC and Gilinski have become partners, with very good capital,” explained Édgar Jiménez, Finance specialist at the Universidad de los Andes and professor at the Universidad Jorge Tadeo Lozano. “They simply coordinated with Gilinski to organize a strategy that, for me, is perfect. I think it goes the way they had thought, which is simply to get a capitalist partner who also supplies money to whom they promise that when they have control of all this, they will have very good companies, not only in Colombia but internationally.”

IHC denies partnership with Gilinski

But Diego Franco, chairman of Franco Group Holdings and CIO of Franco Capital Management, is skeptical that this combined operation would work so smoothly. “I personally have doubts that one could actually unify those two holdings. At the moment they are two completely different people that at some point may come together to have control, but in the end, they will work independently. I want to keep that idea because in business it is better to be very prudent and not suddenly assume coalitions or unions that may not be valid in the end.”

See also: Abu Dhabi Investors Pour $200 Million USD Into Jaime Gilinski’s Lulo Bank

These obstacles are rather confirmed by the booklet of the tender offer presented by IHC Companies Management for Grupo Nutresa shares, which was published by the Colombian Stock Exchange. In this presentation, IHC ensures that “The Offeror advances the Offer independently, following the Offeror’s internal investment policies, within which a global investment policy and diversification of industries and markets by region are contemplated. Within the objectives of investment and global diversification in strategic assets, the Offeror does not act jointly with another company or entity, or person other than the Offeror, in the context of the purpose of this Offer.”

In addition to denying a “company” in this offer, IHC also states that “as of the date of this Booklet and during the term of this Offer, the Offeror is not and will not be a party to any type of agreement or contract intended to regulate, in any way, the exercise of the political rights derived from the Issuer’s shares, with the purpose of exercising control or consolidating a situation of control in the Issuer. Notwithstanding the foregoing, the Offeror, as well as any other shareholder of the Issuer, once the Offer is completed, may evaluate the convenience or possibility of reaching agreements with other shareholders of the Issuer, or the possibility of reaching agreements with other investors of the Issuer to exercise their political rights.”

IHC stated that it is anticipated that the issuer would carry out its corporate purpose as it has in the past once its shares are purchased.

But these words are by no means a promise from IHC, which may yet change its mind. In fact, the document continued: “Notwithstanding the foregoing, the Offeror, as any investor with a relevant participation in a company, may evaluate in the future, depending on the results of the Tender Offer and market conditions, the convenience or possibility of making investments or divestments in some business lines of the Issuer, sell assets of the Issuer or make strategic alliances with local and/or foreign investors for the development of the Issuer’s businesses, make investments or divestments with the objective of reducing the Issuer’s level of indebtedness and generate value for all the Issuer’s shareholders.”

It added that “to date and under the conditions as of today, the Offeror does not intend to make offers for companies related to the Issuer. In relation to companies listed on the stock exchange, the Offeror, like any other investor, may evaluate the convenience of acquiring shares of this type of companies in the future”.

This section brings to mind Gilinski’s initial acquisition proposal for Nutresa, when he pledged that he had no interest in any other GEA companies… And his subsequent takeover bid for Grupo Sura less than a month later.

The way to reclaim Bancolombia

According to both Édgar Jiménez and Diego Franco, Jaime Gilinski’s final goal is Bancolombia, which belongs to Grupo Sura and of which he was a shareholder before being “kicked out” in 2010. In fact, the Gilinskis elevated Banco de Colombia to the status of a preeminent financial institution in the nation in 1997. The Antioquia-based Banco Industrial Colombiano received 51% of the company’s shares in return for $418 million from the Gilinskis. As a result of the merger, Bancolombia was created. Later, the sellers complained about how the transaction had been handled and filed a lawsuit alleging that a portion of the payment had really been made using the investors’ own funds, which the other party denied. The banker ultimately lost and had no ownership stake in the combined bank.

“Gilinski is getting a kind of revenge,” commented Édgar Jiménez to Finance Colombia. “He tells them: ‘I felt I didn’t do the best business with you, and you didn’t sit down and talk to me’, and now after more than 10 years, he is coming back with a lot of strength, so much strength that he is not only interested in Nutresa. Nutresa is the door through which he can reach Bancolombia. He is a banker; he is a businessman. For me, he’s willing to have once again the command of the decision-making power, all the necessary positions on the board of directors of Bancolombia.” This “revenge” is furthermore exacerbated by old territorial rivalries, as Jaime Gilinski is close to Bogotá, while GEA originates from Medellín.

To obtain additional shares in Nutresa, Jaime Gilinski – and IHC – will have to rely on Grupo Sura, the main shareholder of Nutresa. And with $15 per share, he is offering a good price, according to both analysts. “In terms of valuation, it seems to me that he is paying too much,” considers Diego Franco. “But the message here is ‘no matter what it costs, we are going to take over Nutresa’. The next question is whether the GEA group is really going to sell. I would dare to answer that by saying that it is better if it does. If I were GEA, I would sell it.”

However, the Sura group may want to maintain its hold on Nutresa. “The price (offered by Gilinski) is very high and attractive to anyone,” says Édgar Jiménez. “But the Sura group may have an interest in not wanting to get rid of their control on the company and may follow the position they have maintained, by not selling despite the high price.”

Boards of Directors

Jaime Gilinski can rely not only on money, but also on his experience and flair as a veteran investor. “In the business world there are three components: having an opportunity, having the experience and having your own money,” Diego Franco adds. “Usually, people have one or two of those three qualities. Gilinski has all three. He realized that the door was open to taking over very good companies, and he has started to make the purchases we have known about, and at higher and higher prices. Which sends a message to everyone that he wants to take over companies.”

Jaime Gilinski thus keeps the pressure on the Boards of Directors of these companies. In the end, he obtained two out of seven possible chairs in Nutresa, with Ricardo Fandiño de la Calle as patrimonial and Christian Murrle, as an independent. Meanwhile, he obtained three seats in Grupo Sura, with Gabriel Gilinski and Ángela María Tafur as patrimonial members and José Luis Suárez as an independent member.

The market is now waiting for the decision to be taken by the shareholders of Nutresa in November. And, above all, the Argos and Sura meetings to decide.

Lulo Bank is a digital-first “neobank” serving the Colombian market with plans to expand into other Latin American countries. The bank was founded by Jaime Gilinski, a Colombian businessman who also controls Banco GNB Sudameris, ATM network Servibanca, news magazine Semana, and is currently involved in a takeover battle for Colombian food titan Grupo Nutresa.

IHC CEO Syed Basar Shueb commented on the investment: “The fintech ecosystem in Latin America has risen quickly over the past couple of years with sustained growth observed in all segments and in the number of active fintech companies, especially digital banking which has witnessed the most substantial growth at an average annual rate of 57% between 2017 and 2021 to reach 60%. In the case of Colombia, it has made significant progress in terms of financial inclusion with the increase in access to financial products, which rose to 87%. It’s critical for us to align any transaction with our growth strategies, whether to acquire new capabilities or consolidate, and Lulo Colombia S.A. sits very well with our expansion plans in Latin America ”.

Lulo Bank claims to have signed up more than 120,000 customers since it was launched in June this year and aims to complete more than 200,000 users applications before the end of 2022. The bank says it hopes to achieve a customer base of 1 million Colombians within the next three years.

Benjamin Gilinski, Chairman of Lulo Bank and son of Jaime Gilinski, said: “Digital banking has come a long way in Colombia. Adoption of new behaviors and new technologies takes time, but it’s already dramatically changed how consumers interact with financial products in our market. The financial companies that win in the future will be those that understand that human behavior is constantly changing and keep on investing in new technologies. We are thrilled to have IHC join our mission of revolutionizing the financial landscape in Latin America.”

The Colombian market is the fourth global market IHC is expanding its investment activities into this year after the United Kingdom, India, and Turkey.