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DEAL OF THE YEAR: Cross-Border M&A Deal

Jan 1, 2013

Grupo Sura / ING

European financial institutions have been retreating from Latin America and selling what are often some of their most valuable assets to raise funds. Other international players – even some Europeans in better shape – have been picking them up, as have cash-rich LatAm players with regional ambitions.

When ING’s LatAm pension fund assets came up for sale, the winner was not supposed to be a Colombian company that few outside the region had heard of.

The resulting $3.8 billion sale was notable not only for coming against the odds, but giving Grupo de Inversiones Suramericana, or Grupo Sura, the platform for continued regional expansion.

"It was a very competitive process," says David Bojanini, president of Grupo Sura. "We always knew that we had a difficult task ahead of us, but at the same time we sensed that we had a very good chance. It was clearly an audacious move on our part but we proceeded boldly, knowing that the risk at stake was a highly calculated one."

"Grupo Sura was the absolute underdog of that process," says Gérard Crémoux, head of investment banking at UBS, which advised Sura along with Bancolombia and JPMorgan. "They were competing with MetLife, with Prudential, with Principal, which are much better financed, much bigger and much better known companies. Frankly, Grupo Sura, before this transaction, was not a known company."

In addition to Sura not being as well-known, Bojanini identifies valuing the assets in different countries and gathering the financing as the main challenges.

The deal gave Sura the pension, life insurance and investment operations of ING in Chile, Mexico, Peru, Colombia and Uruguay. ING had 10 million customers and $70 billion in assets under management, giving Sura nearly five times what it had previously managed in pensions.

The transaction came at a multiple of 14.9 times expected 2012 earnings and 1.8 times book value. As with many regional financial sector acquisitions, analysts found the price on the high side at the time, representing a good valuation for ING.

The deal is the largest intra-regional cross-border transaction by a LatAm-based buyer, Crémoux says, and the first time a LatAm company has bought into five different countries in a deal of this size. Goldman Sachs managed the sale process for ING.

Grupo Sura was competing with international bidders that didn’t share its need for external financing. It had wanted to pay in shares but had to quickly come up with an all-cash deal ahead of final bids.

JPMorgan and UBS provided a $1.65 billion bridge loan with BBVA, Deutsche Bank and HSBC. Bancolombia organized an $800 million-equivalent loan from a group of Colombian banks.

In November 2011, Sura raised $1.8 billion-equivalent in an equity follow-on to help pay down the bridge financing. Bancolombia and Santander led. Market conditions were rough, and UBS participated for nearly a quarter of the deal. Sura also counted on additional equity investment from Grupo Bolívar, the International Finance Corporation (IFC), General Atlantic and Bancolombia.

Sura will focus on organic growth ahead, and will also keep an eye out for M&A activity, Bojanini says, and regional equity listings are possible in the near term. The financial sector has been LatAm’s most active in terms of M&A in 2012, highlighting opportunities for emerging market corporates while parts of the developed world struggle.

The Colombian group has grown to become a force to be reckoned with. "It is the creation of a Latin American champion," Crémoux says. "Now they are a top player in the pension fund sector in the region." LF



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