Gilinski vs GEA

Gilinski’s attempt to break into GEA suffers a setback as Nutresa bid is blocked.

In 1997, the Gilinski family sold 51% of Banco de Colombia to Banco Industrial Colombian, part of the Grupo Empresarial Antioqueño (“GEA”), creating Bancolombia. The aftermath of this transaction resulted in one of the longest-running feuds in the upper echelons of the Colombian business community. The latest chapter involves Grupo Gilinski attempting a hostile takeover of Nutresa which would come with significant shareholdings in Grupo Sura and Grupo Argos.

GEA is a Colombian keiretsu composed of around 125 companies and 10,000 shareholders with interlocking business relationships and shareholdings. “GEA’s corporate governance is questionable by international standards,” explained a former GEA executive, “the group is so intricate that the decisions of one company substantially affect completely unrelated businesses.”

“GEA’s corporate governance is questionable by international standards, the group is so intricate that the decisions of one company substantially affect completely unrelated businesses.”

Former GEA executive, Colombia

Today, GEA is controlled by four of Colombia’s largest businesses: Bancolombia, Grupo Argos, Grupo Sura and Grupo Nutresa and its income amount to 5.5% of Colombia’s GDP. Tightly interwoven shareholdings between the GEA shareholders had until recently protected the conglomerate’s companies from takeovers, but has Gilinski found a way in?

Not yet. On 18 November the Colombian stock exchange issued a statement declaring void the offer of International Holding Company (“IHC”), an Abu Dhabi asset holding, for a stake between 25% and 31.25% in Nutresa, the Colombian processed food giant. IHC ambitioned to expand globally with a specific focus on South America, but the bid, which had won the approval of the Colombian securities regulator, was only accepted by 7.71% of Nutresa’s shareholders.

Grupo Gilinski’s representatives on Nutresa’s board of directors were also adding pressure to support the transaction but in response Grupo Sura’s board representatives abstained and resigned, triggering a boardroom crisis with a lack of quorum. Grupo Sura’s strategy was backed by a court in Medellín, which ruled that any measure approved by less than four members of the board could not be enforced. The court also ordered the Colombian Stock Exchange not to register any sale of Grupo Sura’s shares in Nutresa.

The key question is … why Nutresa? One theory is that it all boils down to a control premium, a former GEA executive explained, “Grupo Gilinski already owns 31% of Nutresa and 38% of Grupo Sura. Nutresa also owns 13% of Grupo Sura. So, if IHC reaches either 25% or 31% of Nutresa then, together with Grupo Gilinski, they would have control of Grupo Sura and Nutresa, which would practically give them control over Bancolombia, Grupo Argos and other companies where these groups are majority shareholders. So in the end, what the GEA is asking for is that if they have to sell, then the Gilinskis and the Abu Dhabi royal family should pay a control premium.”

“I would expect GEA to be looking for other options. What would they do if a Nestlé came in with a bid?”

Former GEA executive, Colombia

There are other important considerations: minorities, third parties and how long Gilinski can hold out, the former GEA executive continued, “Minority shareholders have so far agreed not to sell the shares to Gilinski, but how long are they going to hold out? If they are offered fifteen dollars for a Nutresa share that was at three or five dollars, they are losing out. So I would expect GEA to be looking for other options. What would they do if Nestlé came in with a bid? The other issue is how long Gilinski can hold out, I heard he has debt in dollars and local currency is weakening so the financial cost is increasing.”

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