(Reuters) -Citigroup Inc will pursue an initial public offering of its Banamex unit comprising consumer, small business and middle-market banking operations in Mexico, the bank said on Wednesday.
Mexican conglomerate Grupo Mexico had been in talks to buy the unit, a person familiar with the matter had told Reuters earlier this month.
In mid-May, amid speculation the deal was finalizing, Mexican President Lopez Obrador said in a press conference there “was no problem” with Grupo Mexico buying the entity. However, a Lopez Obrador-backed decree published days later ordered the “temporary” takeover of a Grupo Mexico-controlled stretch of railway, spooking investors and making talks between the government and the firm “difficult,” Grupo Mexico said.
Citi had announced plans to offload the unit more than a year ago as part of a strategic overhaul by CEO Jane Fraser to exit 14 consumer banking markets in Asia, Europe, the Middle East and Mexico. It now expects the IPO to be completed in 2025.
“After careful consideration, we concluded the optimal path to maximizing the value of Banamex for our shareholders and advancing our goal to simplify our firm is to pivot from our dual path approach to focus solely on an IPO of the business,” Citigroup (NYSE:C) CEO Jane Fraser said in a statement.
Recent complications on the sale process weighed on the decision, including the Mexican government’s demands and other factors, a person with knowledge of the matter said.
Banamex was acquired for $12.5 billion in 2001, while the latest negotiations valued it around $7 billion.
Billionaire German Larrea’s conglomerate Grupo Mexico trumped the head of Mexico’s Banca Mifel, Daniel Becker, to the deal, as the last two bidders for the retail bank, known as Banamex.
Citigroup first announced in January 2022 it would exit Mexico, ending its 20-year retail presence in the country, and prompting an extended bidding process.
Aside from the potential weakening of the business, Citi also has to deal with restrictions put on the deal by Mexican President Andres Manuel Lopez Obrador, including a ban on sweeping layoffs.
In February, Citigroup’s Chief Executive Jane Fraser met with Mexican President Andres Manuel Lopez Obrador. The meeting came amid the bank’s attempt to complete the sale of its local unit.
Shares of Citigroup were down nearly 1.6% at $45.18 in premarket trading.
(Additional Reporting by Yasmin Mehnaz and Niket Nishant in Bangalore, Saeed Azhar in New York and Isabel Woodford in Mexico City Editing by Arun Koyyur and Nick Zieminski)
