Grupo Mexico, a conglomerate best known for its mining and railway operations, has secured a $5 billion debt package tied to its proposed acquisition of Citi’s Mexico unit, Reuters and Bloomberg reported Wednesday, citing people familiar with the matter.
The transaction would value Banamex, as the Citi unit is called, at between $7 billion and $8 billion, the wire service reported.
The development appears to make the conglomerate the front-runner in the sweepstakes for Citi’s Mexican retail presence, which the bank announced last January it would offload.
It also comes as Citi CEO Jane Fraser, who led the bank’s Latin America operations from 2015 to 2019, was set to meet Wednesday with Mexican President Andres Manuel Lopez Obrador, a presidential spokesperson told Reuters. No announcement regarding Banamex’s sale is expected during the visit, Bloomberg reported.
Lopez Obrador has played an outsized role in the potential deal from the start, placing several conditions on the transaction that potentially cut out some would-be bidders. He demanded that the sale wouldn’t result in mass layoffs, that it is backed by Mexican investors, that the buyer must be current on its taxes, and that the bank’s art collection remain in Mexico.
Lopez Obrador in November gave his blessing to the final two bidders for Citi’s footprint: Grupo Mexico and Banca Mifel. Other interested parties, such as Santander, Banorte and Inbursa, the finance firm owned by Mexican billionaire Carlos Slim, had previously dropped out of the running.
Barclays and HSBC are among the banks that are considering providing the debt financing for Grupo Mexico, Reuters reported, adding that Citi has stepped back from conversations with Mifel chief Daniel Becker to prioritize a deal with German Larrea, the billionaire who runs Grupo Mexico.
The deal could still fall through, the wire service’s sources noted. The $7 billion to $8 billion price tag is far below the $12.5 billion Citi paid for Banamex in 2001.
Citi launched an effort in 2021 to exit 13 foreign retail markets and has plans in place to retreat from all but one, Poland. The bank added Mexico to the list last year, and floated the prospect of winding down its U.K. retail banking business, as well.
Citi is not alone in shoring up assets from previous international expansions. HSBC is in the process of selling its Canada footprint to Royal Bank of Canada for $10 billion. That move came after the British bank sold off much of its U.S. presence to Citizens Bank. Elsewhere, French giant BNP Paribas is selling its U.S. retail unit, Bank of the West, to Bank of Montreal in a $16.3 billion deal. And Spain’s BBVA sold its U.S. retail presence to PNC in 2021 for $11.6 billion.
Citi CFO Mark Mason last month said the process to offload Banamex was "well under way," but did not detail the timing of a potential announcement.
Citi, Grupo Mexico and Mifel declined to comment to Reuters. Representatives for Barclays and HSBC declined to comment to Bloomberg.