An unexpected decision by Citigroup Inc. (C.N) to list its Mexican consumer business rather than sell it for $7 billion has delayed the bank’s makeover and is likely to increase investor concern over the leftist president of the nation.
The company, known as Banamex, will be listed by Citi in 2025, and this quarter, “modest levels of share buybacks” will resume.
According to two persons familiar with the situation, the bank is thinking at launching the unit on two stock exchanges, likely in Mexico City and New York.
According to insiders, a deal had been close to being reached for Citi of New York to sell Banamex to Grupo Mexico (GMEXICOB.MX), the business holding company of Mexican billionaire German Larrea.
But as the Mexican president took action on Friday to expropriate a portion of one of the company’s train lines, already building tensions between the conglomerate and Lopez Obrador erupted.
According to two sources familiar with the situation, the two parties abandoned the agreement as a result of the dispute between Grupo Mexico and Citi and additional government demands on Banamex, such as that it remain in Mexican hands and that any new owner not be permitted to reduce costs through layoffs.
Requests for reaction from the president’s spokeswoman went unanswered.
In the past, Lopez Obrador has stated that there “was no problem” with Grupo Mexico purchasing the company. He stated that the Mexican state may take part in a deal following Citi’s disclosure and that the government might have access to up to $3 billion.
The value of Citi shares has decreased by more than 3% so far this year. Shares of Grupo Mexico were up more than 8% despite some of its investors’ confusion over the synergies a mining business could achieve by purchasing a bank.
Banamex was first acquired by Citi in 2001 at $12.5 billion. The lender made the decision to leave Mexico in January 2022, ending its 20-year retail operation there.
The U.S. No. 3 bank, which has battled for years to obtain scale and profitability from a variety of operations abroad, underwent a more extensive restructure as a result of the sale. CEO Jane Fraser made the decision to quit consumer businesses in 14 markets while concentrating on rich clientele and international corporations to increase profitability.
The bank felt that an IPO would be the best way to “advance our goal to simplify our firm,” according to Fraser, who had visited Lopez Obrador in February.
However, it is yet unknown whether investors would be interested in such a sale, especially in light of the Mexican government’s opposition to layoffs that could be required to make the business more competitive.