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Battle for Colombia's most powerful business group

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A walk through Medellín, Colombia’s second city, is never far from the banks, offices and shops that are in some way controlled by the country’s most powerful consortium of companies, the Grupo Empresarial Antioqueño.

On the street corner is a branch of Bancolombia, the country’s largest bank. Inside the shimmering glass tower is the headquarters of Grupo de Inversiones Suramericana, Colombia’s largest financial conglomerate with stakes in banking, insurance, pensions and wealth management. If you buy food in one of the city’s supermarkets, chances are it’s made by Grupo Nutresa, which started as a Medellin chocolate maker over a century ago and is now one of Latin America’s largest processed food companies. I have.

All these companies and over 100 companies are part of the GEA. GEA is a network of companies in Medellín and the surrounding Antioquia province, interconnected through an intricate network of cross-shareholdings and family ties. Among them, it accounts for more than half the value of Colcap, the main index of the Columbia Stock Exchange.

Group composition similar to Japan series, Because the companies have formed close relationships with each other, they are largely immune to external takeovers. In fact, that’s why the group was first created in the 1970s to protect Medellín-based companies from takeovers from Bogota.

But now, more than ever, GEA is under attack.

Late last year, Colombian businessman Jaime Gilinski, in partnership with the Abu Dhabi royal family, launched a series of hostile tender offers to break out of the tight-knit structure of GEA. Gilinski says the company has disappointed investors.

Canned food produced by Nutresa in a Cartagena supermarket
Nutresa canned food in a Cartagena supermarket © Jeffrey Isaac Greenberg/Alamy

“Management didn’t pay attention to shareholders,” he told the Financial Times in a recent interview in London. “Strategic holdings were great for management to maintain control, but what did shareholders get?”

Gilinski’s takeover offer shook Colombia’s stock exchanges and sent ripples across a region where hostile takeovers are relatively rare.

“There have been acquisitions in Colombia before, but the difference this time is that they are hostile and bigger,” said Juan Camilo Jiménez, head of equity at Credicorp Capital in Bogota. . “These are strong companies not only because of their weight in the stock market, but also because of their importance at the national and regional level.”

Gilinski’s six consecutive bids target GEA’s three core companies, Sura, Nutresa and industrial conglomerate Grupo Argos. Gilinski and his partner have spent about $2.8 billion (more than half of his personal net worth according to Forbes) and have indicated their willingness to continue.

They now own 38% of Sura and 31% of Nutresa. This gives us an indirect stake in Bancolombia and other important GEA companies.

But GEA is fighting back. The company made strategic appointments to its board to eliminate conflicts of interest among board members, allowing it to maximize voting rights in the face of Gilinski’s attacks.

“This reinforces Gilinski’s intention to try to untangle the GEA from a more difficult proposition,” said Luis Ramos, senior Colombian analyst at regional asset management firm Larainvial.

Billionaire Jaime Gilinski attends Grupo Sura shareholder meeting in June
Billionaire Jaime Gilinski (center) attends Grupo Sula’s shareholder meeting in June © Edinson Ivan Arroyo Mora/Bloomberg

People who the FT spoke to at GEA firms, Sura, Argos and energy company Celsia, have rejected Gilinski’s accusations of failing investors.

“Grupo Sura’s total share value has grown 36 times over the last 20 years,” CEO Gonzalo Pérez said in an interview with the FT in Medellín. “Our dividend has increased at a compound annual growth rate of 10% over the same period.”

They also argue that companies should be valued not only for their stock price and return on investment, but also for their contribution to the community. Over the past decade, Sura has invested approximately $70 million into social, educational and cultural projects in Colombia and other parts of Latin America.

“These companies have provided social and economic value during the most complex times both for Medellín and for the country as a whole,” said Maria Viviana, executive director of ProAntiochia, a foundation promoting the development of the region. Botero said. “They were during drug violence and more recently [coronavirus] Their contribution has been crucial in addressing the local medical emergency. they saved lives. “

But the group has had its critics even in its home base of Medellín, including outspoken left-wing mayor Daniel Quintero, who said earlier this year in a news magazine that Zhilinsky acquired in 2020 that In an interview with Semana, the GEA said the claims had robbed the city of its finances.

However, Quintero has not provided evidence for his claims and has refused to speak to the FT about this article.Some GEA companies have threatened to sue Quintero for defamation.

The results of the battle will be felt beyond Colombia’s borders. Between them, GEA companies reach far beyond their borders. Grupo Sura operates in his 11 countries in Latin America. Nutresa exports to over 70 countries worldwide.

According to Proantioquia, the GEA produces about 6% of Colombia’s GDP.

“GEA companies have been one of the driving forces of development in the region and have been micromanaging every aspect of public policy in Medellín and Antioquia for decades,” he said, examining the group in detail. Colombian economist Javier Mejia said. “For a long time they were the only channel through which people could access the formal economy of Antioch.”

For now, Gilinski’s bid appears to be stalling. His latest stake building at Nutresa in May and Argos in July fell short of the level he was seeking.

Ramos of LarrainVial predicted that this could “pause the Gilinski vs. GEA narrative” in the coming weeks and months. However, he added: