Petro takes over the market to bring peace between GEA and Gilinsky

Three page decree and 11 line article. In this way, the government of Gustavo Petro gave the green light to the peace agreement between the Antioqueno Business Group (GEA) and the Gilinsky bankers. With the gesture, Petro pointed to the trade sector and in the process won a peacemaker medal in the most heated economic battle in recent years. And, in parallel, he settled into state interventionism, surrounded by the applause of economic groups defending market freedom.

Their tailored order protects the interests of some cocoa companies, but does not have the same beneficial nuances for minority shareholders. Although the super-financier, Cesare Ferrari, was optimistic in his statements this Wednesday: “The decree will allow the exchange of shares, because this cannot happen without a prior public takeover offer (OPA). They (GEA and Gilinsky) We will negotiate the percentage to be exchanged as per our valuation and this will create peace in the market.

The promise of peace from the Casa de Nariño had already been announced. Last January 12, at a tablecloth lunch, Petro negotiated Pesa businessmen with Valle del Cauca bankers. Purpose: To finalize the details of the decree that will bring peace. But it was also a space for barter, as the president managed to include both groups in his national agreement to bring investment to the poorest areas. This meeting was like a normal handshake between the government and the market.

The short text that will settle the war between cocoa

This is Decree 0079, signed by the Minister of Finance, Ricardo Bonilla, which adds a paragraph to Decree 2555 of 2010. In the views, the government justifies the creation of an exception for the exchange of shares, which they agreed upon at the GEA last June. and Gilinsky, “to create operational efficiencies in participating companies, facilitate the resolution of conflicts in the short term, and promote the definition of new corporate governance plans.”

To date, GEA (Sura, Argos and Nutresa Group) and Gilinsky (Nugil and JGDB Holding) agreed to end hostilities after seven takeover bids that almost decimated the first group and tore down the half-century-old business palace. . The parties signed an agreement in which GEA agreed to give up control of Nutresa (a group that brings together brands such as Zenu, El Coral, Noel, Tosh, Ranchera and Jet), while Gilinsky and his Arab partners Accepted the return of Sura and Argos.

The transaction was not supported by current laws, and this explains the issuance of the decree. This would allow GEA and Gilinsky to exchange their shares in Argos and Sura (due to the cross-shareholding model of these companies) directly through a share exchange agreement and without the need to prepare a takeover bid.

Invoking the newly created exception implies meeting the following conditions: that the interested party wishes to acquire full control of a company (which is listed on a stock exchange), that its stake in it is between 25% and 50%, and He also has the right to vote. These are exactly the conditions met by Gilinsky, who today holds majority stakes in Nutresa and Sura.

But this is only the gateway to the decree. The second moment talks about protection of minority shareholders through takeover bids. “It is mandatory that the said investors, within one month after the completion of the swap contract (exchange), request for authorization for a takeover bid addressed to those shareholders who do not participate in the said contract,” the text emphasizes. Having said. Guarantee for minorities.

The decree does not bring anything new to what was agreed upon by the groups half a year ago. “There is no mystery in it. It happened as expected,” says a young GEA executive, who requested reservation because he was not the spokesperson at the talks. “Without it, the operation would be much trickier: an exchange would be privately negotiated, and then minority shareholders would be given the chance to exit through a takeover bid.”

Now, where are the minorities whose protection is promised in this decree? The deal between these groups involves Gilinsky with the Arabs, who will initially own 87% of Nutresa. The thing is that between their shares, and those that Sura and Argos will leave, only reached 76.9%. “The decree authorizes groups to launch takeover bids for the missing 10% and thus add the agreed percentage,” says the GEA executive.

That percentage will be paid by GEA and the additional crop that comes with OPA will be assumed by Gilinsky Group. And in the middle of this process, Nutresa’s minority will be able to decide between selling each share at $12 (an amount agreed between the two groups in June), remaining in the company, or requesting an exchange for Sura or Argos shares. “This is the heart of the decree, and the message to the capital markets: that the remaining 23% of Nutresa will have options to exit the business, and at a good price,” says the executive.

Economist and Stanford University professor Javier Mejía agrees and believes that the dispute could have been resolved through the stock market, but that route would have been more complicated. “This was the quickest option to solve the problem. And so far there seems to be a concern to protect small shareholders who are left out of the deal between the big shareholders,” he says.

And no further takeover bids will be forthcoming from Sura or Argos, as the special conditions required by decree for this type of business prohibit Gilinsky from proceeding. This is what Superintendent Ferrari specified: “The upcoming takeover bid is only for Nutresa, which has a larger public stake compared to other companies. Later we will see whether minority shareholders need others.

Decree 0079 of January 30, 2024 by edison.henaohe on Scribd

Referee interfering in favor of the Sharks?

But there are voices that disagree and see no protection for minority shareholders in a government-backed business. The case concerns Jorge Restrepo, an economics professor at Javeriana University who is also a minority shareholder in two of the companies involved in the fight. For Restrepo, the decision that makes this exchange possible with a return to the market not only goes against minority shareholders, but also undermines free competition.

“The decree blocks the takeover bid for shares that GEA and Gilinsky are going to exchange privately. Groups like Unilever, Exito and others interested in Nutresa will not be able to bid. Why should there be any compromise that prevents them? The President, who claims to be a friend of competition, is undermining it with this decree,” the economist says.

But the matter goes further than this. Restrepo put his finger on the Achilles heel, reiterating that it was the groups that set the trading floor at $12 a share: “Who defined the price for the share swap? He defined it personally. And that’s why we have a public stock market.”

—But wasn’t it the peace pipe?

“It was,” Restrepo says. But what difference does it make to us? Who said minority shareholders have to accept that price or forgo buying?

On the same shore is a famous lawyer associated with the Colombian Stock Exchange, who requests a reservation to protect his work. The jurist says the Petro government’s decision represents an abuse of power: “As long as it operates legally, the government should not care who owns these businesses.”

The truth is that government intervention could undermine the credibility of the Colombian stock market. “The market already acts as an arbiter, so there should not have been any decree. The government issued it specifically to do a favor to the Gilinsky family, Restrepo says, because they ordered the hostile takeover. And stock market sources say: “This measure is shameful. He speaks very badly about the government and positions us as a leading market (incredible).”

Mejia, the Stanford professor, says the accepted exception was less bad. And although the adjustment may result in future injustice to minorities in similar occupations, these types of exchanges are not entirely disproportionate and the measure sets a precedent in the country. “Yes, the stock market may crash, but the truth is that no big business in Colombia happens without the sympathy of the government. Even all acquisition bids will have to be approved in this pulse,” he says.

In any case, this appears to be the beginning of the end of an economic novel that has caught even the President’s fancy. The picture that remains, while GEA and Gilinsky have thoroughly divided the blankets, is the picture of a President who put his hands in the fire for some cocoa, who looks grateful today. “Petro was interested in solving the most notorious economic crisis of the last 30 years. And although I don’t see much of a task, he definitely wanted to win that medal,” says the young GEA executive.