Colombian Pension Fund Is Key in Billionaire’s Bid for Food Firm

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(Bloomberg) — Billionaire Jaime Gilinski’s takeover bid for a majority stake in Colombian food producer Nutresa SA has placed the spotlight on a pension fund manager that may hold the key to whether the transaction goes through.

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Proteccion SA, which manages retirement funds with a 5.2% stake in the Medellin-based food producer, is closely associated with the two largest holders of Nutresa — Grupo de Inversiones Suramericana SA, or Sura, and Grupo Argos SA, which combined hold another 45.3%. If they don’t want to sell, that means Proteccion could tip the scales one way or the other should minority investors decide to tender at the 38% premium on offer.

Nutresa, Proteccion, Sura and Argos form part of an exclusive business group that hails from Medellin called the Grupo Empresarial Antioqueño, or GEA. The coalition runs large swathes of Colombia’s economy and publicly traded conglomerates, and since the 1970s and 1980s has been able to fend off hostile acquisition bids.

But now Gilinski, who has made the bulk of his estimated $4.4 billion fortune in banking and private-equity investments, is looking to upset that dynamic. He’s partnered with Abu Dhabi’s Royal Group to offer to buy a minimum of 50.1% of shares and a maximum of 62.6%, according to people familiar with the plans. The offer, at $7.71 per share, represents a 38% premium from where the stock had been trading before the announcement.

Sura and Argos aren’t likely to tender and give up control, but will need Proteccion or other minority shareholders to also reject it in order to block the deal, BTG Pactual analysts Daniel Guardiola, Alonso Aramburu and Daniel Callamand wrote in a report. Other minority holders include pension funds managed by Porvenir SA and an exchange-traded fund from BlackRock Inc.

Proteccion “could play the role of either being the deal maker or the deal breaker,” they wrote.

The major holders haven’t publicly announced their stances on the offer for Nutresa, which makes coffee, crackers, pasta and meat. Grupo Sura’s management called for a board meeting to consider its next steps, while Argos said in a filing that its board agreed to hire advisers to analyze the economic and legal aspects of a deal. Proteccion declined to comment, saying it is waiting for the financial regulator to decide whether it approves the tender.

If Proteccion, Colombia’s second-biggest pension-fund manager, rejects the offer, it would need to publicly justify the decision given its duty to maximize investors’ returns, according to Luis Carlos Bravo, a professor of finance at Colombian business school INALDE.

“It would sound strange for it to say no, especially if the other pension fund managers agree to the offer,” he said. “That may be seen as a conflict of interest, a decision that would look to preserve the group’s structure and might not be in pensioners’ best interest.”

Jose German Cristancho, the head analyst at Bogota-based Davivienda Corredores brokerage, says it won’t be an easy task to reach the 50.1% threshold.

“You can argue that while there is a premium, it isn’t necessarily a fair price for the company,” Cristancho said in an interview. The price is 9 times a measure of earnings, and similar acquisitions have been carried out at 13 times, he said.

LarrainVial analyst Luis Ramos disagrees. In a report, he wrote that “the asking price looks attractive, particularly for non-strategic investors in the company.”

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