With 4th Tender Offer For Nutresa Opening November 3, What Is Behind Jaime Gilinski’s Battle For Control of GEA?
The powerful Colombian banker and real estate developer Jaime Gilinski (Publicaciones Semana, Banco GNB Sudameris, Lulo Bank, Servibanca, etc.), the second richest person in the country, is making his move in the hope of undoing the castling of the Grupo Empresarial Antioqueño (GEA). GEA is the largest and most representative Keiretsu, or alliance of companies in Colombia, controlled and managed by 3 companies: Grupo Argos (BVC: GRUPOARG), Grupo Sura (BVC: GRUPOSUR) and Grupo Nutresa (BVC: NUTRESA). All three are listed on the Colombian Stock Exchange (BVC).
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.”
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.