By Jorge Porter?/?Business News Americas
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Mexican financial group Grupo Financiero Banorte has reached an agreement with BBVA (NYSE: BBVA) to buy the Spanish bank's local private pension fund Afore Bancomer for US$1.6bn in a deal that will create the largest retirement savings manager in Mexico.
The acquisition will be made through Afore XXI Banorte, the pension fund jointly owned by the group's banking unit Banorte and Mexican social security agency IMSS, which will each pay 50% of the price, Grupo Financiero Banorte said in a press release.
The final price for the acquisition will be determined based on Afore Bancomer's excess capital at the time of closing.
According to BBVA's press release, such adjustment could reach an additional US$130mn.
The operations of Afore Bancomer and Afore XXI Banorte - the country's second and fourth largest Afores in terms of assets under management, respectively - will be integrated when the transaction is finalized.
Combined assets under management will amount to 516bn pesos - US$39.5bn, or a 28% market share according to the latest figures from local pension regulator Consar - and accounts will total 11.8mn.
Grupo Financiero Banorte said it has enough resources to fund its share of the deal, using its capital and "through other liquidity sources," which JP Morgan interprets as meaning that common equity will not be used to directly fund the acquisition.
The purchase is subject to the approval by the corresponding authorities, including Consar and Mexico's antitrust body Cofeco.
The deal is expected to close in 1Q13 and will represent a net gain of 800mn euros (US$1.03bn), BBVA said.
BBVA announced in May that it was looking to sell its pension units in Colombia, Peru, Chile and Mexico in an effort to strengthen its core banking business.
According to press reports, Chilean pension fund manager AFP Habitat has partnered with a foreign company in its bid for BBVA's pension assets in Colombia and Peru, while MetLife (NYSE: MET) is close to inking a deal to buy Chile's largest pension fund manager AFP Provida (NYSE: PVD).
BBVA reportedly hopes to net US$5bn from the combined sales.
THE ANALYSTS' TAKE
Afore Bancomer posted net income of 1.23bn pesos in January-September and had 277bn pesos in assets under management as of end-October.
As such, Deutsche Bank estimates Banorte is paying 12.7-13.7x 2012 annualized earnings and 7.5-8.1% of assets under management.
However, the Mexican company paid US$200mn for a 50% stake in Afore XXI last year, which posted net income of 581mn pesos in 2011 and had assets under management of 108bn pesos at the time.
"Therefore, we estimate that Banorte paid 9.6x 2011 earnings and 5.1% assets under management, both discounts to the multiples that Banorte is paying for Afore Bancomer today," Deutsche Bank said in a research note.
In turn, JP Morgan said the price paid seems reasonable, but that it would like more details about whether the transaction has any negative impact on Banorte's capital position, the funding structure and the expected size and nature of synergies.
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Source: http://member.bnamericas.com/news/banking/banorte-to-buy-afore-bancomer-from-bbva-for-us16bn1
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