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Colombia continues to lure global FIG powers

Nov 12, 2013

Companies and analysts see room for growth in Colombia in banking, insurance and other areas. AXA’s insurance buy is seen coming at an attractive valuation.

It has been a while since the large bank M&A deals of 2011-2012, but global financial players continue to target a Colombian financial sector seen as offering strong growth prospects.

French insurance group AXA became the latest, taking 51% of Colpatria's Colpatria Seguros insurance business in a  EUR259m ($346m) transaction. High valuations have become the norm in Colombia's financial sector in the last few years, though the multiple AXA paid was seen as reasonable.

"Financially, the deal is valued at 13.0 times 2012 earnings, which we believe is attractive for a company that has had a top-line [annual growth rate] of 28% since 2009 and has strong growth prospects going forward," Heleva says in a note. The bank says that insurance penetration in Colombia is still low, at 2.4% compared with 3.7% in Brazil and 8.2% and 8.9% in the US and in France, respectively.

Directly comparable transactions in LatAm are few, but the valuation compares well with AXA and other global powers have done in the emerging markets. The 13 times level compares to a 10 times figure in Zurich Financial's $1.67 billion purchase in 2011 of Santander's LatAm insurance operations, and a 15-16 times level seen in the $879 million purchase by Allianz of Turkey's Yapi Kredi Sigorta earlier this year.

This week's Colpatria deal was seen at 2.7 times price/book. Colpatria Seguros is Colombia's fourth-largest insurance company, with a market share of 7%. The move is in line with AXA's previously communicated emphasis on EM growth markets.

Colpatria itself was a target, with Scotia swooping in late 2011  for a 51% stake valued at about $1 billion. The deal was seen coming at 12 times earnings, and more than 3 times price/book value, according to analyst comment at the time.

Chile's Corpgroup followed, paying $1.23 billion for  Santander's Colombia operation, at 3 times book. A year later, it bought  Helm Bank for $1.28 billion, or 14-15 times earnings and 1.6-1.8 times book value.LF



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