Mexico’s Banacci Seeks Merger to Create Region’s Top Bank

Top Mexican financial group Banacci on Wednesday launched a surprise bid to create Latin America’s largest financial powerhouse, trying to muscle out Spanish giant BBVA in an offer for Mexico’s No. 2 bank, Bancomer.

Grupo Financiero Banamex-Accival said it planned to inject $2.4 billion of new capital into the new group, which it said would have 11 million clients and $60 billion in assets, Latin America’s largest.

That compared with Spanish Banco Bilbao Vizcaya Argentaria’s (BBVA) March offer to inject $1.2 billion into Bancomer--a deal agreed to in principle and yet to be given the green light by regulators.

“Mexicans, answer the call to arms,” a source close to the Banacci-Bancomer proposal said, quoting the national anthem and asking not to be identified. He acknowledged Banacci’s bid for Bancomer was in part motivated by a desire to keep the Spanish out.

Banacci said the new group would make a $500-million rights offer, leaving Banacci shareholders with 65% and Bancomer shareholders with 35% of the merged bank.

It said minority shareholders would not suffer excessive dilution and would benefit because of the enhanced value of the new group.

“The maximum ownership dilution for shareholders that choose not to subscribe in the offering is estimated not to exceed 4% to 6%,” Banacci said in a statement.

A year ago, rumors of an alliance between Mexico’s top two banking houses first emerged after the groups announced they would set up a joint company to carry out some banking functions, such as credit card processing.

But the speculation about a mega-merger died down when BBVA made its bid for Bancomer--welcomed by banking analyst as a major step to helping the banking system put a legacy of bad debts from the 1994-95 peso crisis behind it.

Like most of Mexico’s financial system, Bancomer and Banacci were brought to their knees when millions of debtors defaulted after the peso crash pushed interest rates beyond 100%. Banacci has recovered steadily and is considered by banking analysts to be out of the woods. Bancomer has also made great strides, but many analysts believe it still needs several hundred million dollars in new capital.

Banacci said the new group would be fully capitalized and would be able to provide for all its past-due loans and loss-sharing agreements on bad bank debt taken on by the now-defunct Fobaproa bank rescue agency.

Fobaproa, which has been replaced by the IPAB deposit guarantee agency, spearheaded a government salvage operation in the banking sector expected to cost taxpayers some $100 billion, or 20% of gross domestic product.

“The proposed capital plan . . . is a comprehensive capital plan,” Banacci said in its statement.

“When fully implemented, it will create enhanced value for both groups of shareholders from expected material cost savings and revenue synergies . . . a strong and high-quality capital base consistent with international standards and the provisioning for all expected loss contingencies.”