Colombian giant: Grupo Sura's $3.7 billion acquisition of ING assets has created one of the top financial service firms in Latin America.
BOGOTA -- It has been a stellar year for Colombia's Grupo de Inversiones Suramericana (Grupo Sura).
With the acquisition of most of Dutch group ING's Latin American insurance and pension portfolio in July, the Colombian investment group has positioned itself as one of the leading providers of financial services in the region.
Getting there has been a rollercoaster ride, says Andres Bernal, Grupo Sura's vice-president of investment.
"It's the largest acquisition of a foreign company ever done by a Colombian company. We've broken records. It's been a roller coaster. We are very proud, excited and fired. It's been a long journey," Bernal says.
That journey started in January 2011 when ING was looking to shed assets to comply with the terms of its government bailout following the 2008 financial crisis.
Few could have anticipated that this would become a surprise opportunity for Grupo Sura, a relatively little-known investment group with a team of 18 people based in Colombia's second city, Medellin.
When ING hired Goldman Sachs as their main advisor, the investment bank compiled a list of possible buyers for the Latin America arm of ING's insurance business. Grupo Sura didn't even feature on the original list.
But David Bojanni, president of Grupo Sura, had a different game plan. He relayed a message to ING expressing the company's interest in buying part of the Dutch giant.
In just several months, Grupo Sura beat off big names in the insurance and pension industry to win the deal.
"We've heard that there were 15 bidders behind ING in the non-binding process, and five of those, including Grupo Sura, were chosen to take part in a binding process, including Prudential, Principal, Metlife and a joint-venture company that included interest from Mexico, Peru, Colombia and Chile," says Bernal.
It was just a small difference that finally clinched the deal.
"We paid almost $3.7 billion for ING. We won by a tiny difference, by less than one percent of what the runner-up offered, which was $3.67 billion," Bernal says.
The deal includes ING's assets in Chile, Colombia, Mexico, Peru and Uruguay, excluding ING's 36 percent stake in leading Brazilian insurer Sul America SA, which will be sold off separately.
Analysts say the deal is a fair price in a region where positive economic growth is projected, giving Grupo Sura access to Latin America's key markets via the second-or third-biggest pensions and insurance groups.
"It's a reasonable price considering they (Grupo Sura) are buying control, a whole package of five countries at the same time, where the brand is already well-positioned and well-known. It's a strategic expansion that allows Grupo Sura very positive growth," says Jairo Agudelo, a senior analyst at Celfin Capital, a Chilean brokerage with offices in Medellin.
"Latin America is a region where economies are stable. The IMF predicts a growth rate of about 5 percent for the next five years," Agudelo added.
For Grupo Sura, buying ING was a 'very good fit,' says Bernal, complementing its existing portfolio where it holds significant stakes in companies in other countries throughout the Americas.
"Of the seven countries we want to expand in Latin America and Central America, ING already had profitable companies in five of those countries, so it was a very good fit for us. The acquisition allows us continued growth and expansion in the Latin American market," Bernal says.
The deal, the largest ever cross-border acquisition within Latin America, also allows Grupo Sura to expand its customer base.
"With this acquisition we will have 25 million clients in the region and assets under management of over US$120 billion. So we are becoming the largest pension provider and one of the top in insurance in Latin America, which is part of our long-term plan and strategy," Bernal says.
In recent months, Grupo Sura, a parent company of Colombia's largest bank, Bancolombia, has been on an expansion drive, picking up US cement companies through subsidiary Cementos Argos and El Salvadorean insurer, Aseguradora Suiza Salvadorena.
The historic deal was four months in the making. Advisors based in South America, the US and Europe, including 20 lawyers from law firm Shearman & Sterling, shuttled to and from New York city, where most of the pre-deal negotiations took place.
"A lot of people were involved in the negotiations, 300 people were involved in this process. Local lawyers in five countries, investment bankers, UBS bank and Bancolombia and information technology, accounts and tax specialists," says co-negotiator Bernal.
"It was an acquisition that has companies in five different countries and also different types of companies, pension funds, and insurance, so it's a complicated structure," Bernal explains.
On a typical spring-like day in late July, the swank, glass headquarters of Bancolombia in Medellin became the backdrop for the groundbreaking deal.
In a fleeting visit to Colombia, Jan Hommen, ING's CEO, flew in from Amsterdam via Panama to Medellin to seal the deal.
He arrived late on the Friday at the start of a weekend-long marathon push to get the deal signed.
"The chairman of ING flew to Medellin to get to know us and to know the people who are buying the company. We stayed all day Saturday and Sunday at the Bancolombia headquarters where we did the final presentations and negotiations," Bernal says.
A Colombian lunch of ajiaco soup, plantain and fruit juices, and one glass of white wine, provided a brief respite as Grupo Sura's two main negotiators, Bernal and Bojanni, and ING'S core team of five negotiators, finalized the nitty-gritty details.
"When we agreed on the price, when then had to agree on the transaction and preparations. There was an all-day conference call on the Sunday with lawyers in Medellin, Amsterdam and New York," Bernal explains.
"The negotiations were complicated. We had to prove, and guarantee, that we had the resources to go ahead with the acquisition," he says.
It was a race against time. ING wanted the deal to be signed before the markets opened at 7am Amsterdam time on the Monday morning and have the press release ready, Bernal says.
The contract, containing over 100 pages, was simultaneously signed in New York, Amsterdam and Medellin, just minutes before the European markets opened.
"Sunday 25th of July was a very special day for us. We signed just before midnight Medellin time on that day after a very tough week. We scanned the signatures," Bernal says.
Shortly afterwards, Colombia's president, Juan Manuel Santos, phoned the Colombian negotiators congratulating them on the acquisition he described as, "big news not only in economic terms but in geopolitical ones too."
With the ink barely dry on the contract, Grupo Sura then turned their focus on the final step of the transaction--raising the $3.7 billion.
Grupo Sura has brought in mino-rity partners including the International Finance Corp (IFC), the investment arm of the World Bank, and other co-investors to cover up to 25 percent of the total ING asset purchase.
The deal needed regulatory approvals from the respective authorities in Chile, Mexico, Peru, Uruguay and Colombia.
Grupo Sura used credit, the sale of $2.1 billion worth of preferred stock, and its own funds to finance the purchase. "The local offering of sale shares in Colombia has raised $1.82 billion," says Bernal.
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|Title Annotation:||INDUSTRY REPORT: Latin Trade's DEALS of the YEAR|
|Comment:||Colombian giant: Grupo Sura's $3.7 billion acquisition of ING assets has created one of the top financial service firms in Latin America.(INDUSTRY REPORT: Latin Trade's DEALS of the YEAR)|
|Date:||Jan 1, 2012|
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