Citi Pushed by Grupo Mexico to Keep Stake in Banamex After Sale

Grupo Mexico SAB is pushing Citigroup Inc. to keep a portion of its Mexican retail operation, which it would later sell in a public offering, according to a person with knowledge of the matter.

(Bloomberg) — Grupo Mexico SAB is pushing Citigroup Inc. to keep a portion of its Mexican retail operation, which it would later sell in a public offering, according to a person with knowledge of the matter.

Grupo Mexico, the conglomerate run by mining magnate German Larrea, is negotiating the percentage of Banamex that Citigroup would keep if an agreement is reached on a sale, the person said, asking not to be identified because the talks are private. A final deal hasn’t been reached, and the negotiations could still fall apart, the person said.

Larrea’s company wants Citigroup to hold onto a stake in Banamex to keep the New York-based bank engaged and provide certain services during what is expected to be a long process separating Citigroup’s retail business in Mexico from the institutional bank it wants to maintain in the country, the person said.

Citigroup executives have stressed since last year that they are exploring options for Banamex that could include an initial public offering as well as a sale. El Financiero editor Enrique Quintana reported last week that Citigroup might hold onto a stake and sell it later.

Grupo Mexico is close to lining up financing to back a $7 billion-plus bid for Banamex, Bloomberg News reported last week. That compares with a valuation for Banamex of between $12.5 billion and $15.5 billion that Bank of America Corp. analysts estimated early last year when the sale process started. Should a stake in Banamex be kept, that would allow Citigroup to record a higher valuation for the whole unit, said the person with knowledge of the matter.

Grupo Mexico has been in advanced talks with Citigroup to purchase Banamex since December. The pool of potential bidders dwindled after Mexican President Andres Manuel Lopez Obrador placed conditions on any deal, including a requirement that Mexican capital back the transaction. Citigroup Chief Executive Officer Jane Fraser visited Mexico last week and met with Lopez Obrador.

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