Dow Jones
MEXICO CITY - Mexican regulators have given the green light to Citigroup Inc. to purchase Grupo Financiero Banamex-Accival, but one of them set several conditions for the deal.
In separate press releases late Wednesday, the Finance Ministry and the Federal Competition Commission, or CFC for its Spanish initials, authorized the $12.5 billion deal.
But the CFC said its approval was conditional on the companies merging the pension fund managers Garante SA and Afore Banamex Aegon. It also required Banamex to sell its stake in the e-business company Servicios Electronicos Globales, or E-Global, and Citigroup to eliminate its joint stake with Grupo Financiero BBVA-Bancomer SA in the credit agency Credito Familiar SA.
Those actions must be completed within the year, the agency said.
However, the pension fund, electronic payment processing, and, to a lesser degree, the consumer financing markets could be affected by the deal, the agency said.
In pension fund administration, "the presence of a single agent in two Afores [pension fund managers] will create a competitive disadvantage for the remaining participants in the market," the CFC said. It therefore recommended Citigroup and Banamex merge their managers.
Pension regulations prevent any individual fund manager from having a market share of more than 20%, or more than 4.64 million account holders. Afore Banamex Aegon had 2.36 million account holders at the end of March, ranking third in the industry with an 8.6% market share. Garante ranked fifth, with 2.05 million clients, or 7.5% of the market.
Citibank also owns a stake in one of Mexico's largest electronic payment processing services, Prosa. Banamex has a shared stake with BBVA-Bancomer and Grupo Financiero Bital SA in E-Global.
As for Credito Familiar, the CFC said it "considers it necessary that the merged company does not hold a stake in a company related to its principal competitor." Citigroup and BBVA-Bancomer both hold shares in the credit agency.
Separately, the Finance Ministry said it had no objection to the proposed operation, following consultations with the Bank of Mexico and the National Banking and Securities Commission.
Citigroup is expected to complete its purchase of Banamex by yearend. The deal would make Citi the largest financial services group in Mexico.
The deal also has to be approved by U.S. financial authorities.
