Why did Banorte shareholders vote against the merger?

CITY OF MEXICO (Expansion) –

On December 5, 71.61% of investment partners of Banorte and Interacciones approved the merger of the two financial institutions, which count among their shareholders members of the Hank family. The merger would place the Mexican financial institution acquired by late Roberto González Barrera – founder of Gruma – as the second largest in the country by level of assets and as the largest group of infrastructure finance in the country.

But not only would this imply a kind of "return home" for Carlos Hank González, president of Grupo Financiero Banorte. The businessman has been managing director of Interacciones for 14 years, since 2000, where the current chairman of the board of directors is his father, Carlos Hank Rhon, who is also one of its major shareholders. His sister, Graciela Hank González, also participates in this financial institution.

Lee: A majority of shareholders approve the merger between Banorte and Interacciones

These family ties have caused the rejection of some of the foreign investors of Banorte, who opposed the merger with Interacciones and challenged the appointment of certain directors and directors of the Mexican Financial Group for potential conflicts of interest.

In this December vote of last year, 13 foreign institutional shareholders voted against the merger between Banorte and Interacciones, as disclosed by Proxy Insight data sent to Expansión. Investors who voted against included BlackRock, Aberdeen Standard Investment, APG Asset Management and Norges Bank Investment Management. All are institutional shareholders of Banorte High profile.

At an annual meeting last April, some international shareholders warned of a potential conflict of interest and were opposed to the ratification of the chairman of the board, Carlos Hank González, and the president. other directors and board members such as Marcos Ramírez Miguel, CEO of the financial group; Juan Antonio González Moreno, president of Gruma and member of the same family; and Eduardo Livas Cantú, member of the executive committee of Gruma

Lee: Accionisas extranjeron vote against the merger Banorte-Interacciones

This is the case of APG Asset Management, the German pension fund bpfBOUW and other major investors like the California State Teachers' Retirement System, Domini Investments, Metaal Pensioenfonds in Techniek, Calvert Research and Management and the Ohio Public Employees Retirement System, according to data compiled by Proxy Insight.

"We do not support non-independent directors sitting on key committees of the board of directors," said institutional investor British Columbia Investment Management Corporation (BCI), which administers assets of 135, $ 5 billion. "We hold the nominating committee chair accountable for failing to ensure that all major board committees are completely independent," the Canadian firm added in a note attached to its vote, published at the annual meeting. of April 27th.

Rolando Rodrigues, an analyst of British asset manager Sarasin & Partners, told Reuters that his company had voted against this acquisition because of "the abundance of governance issues". "It was a transaction with parties related to important conflicts of interest," he said in an interview with the news agency

Lee: Banorte-Interacciones Wants to be King of Infrastructure

It is the largest bank of the country in the hands of Mexicans who focus on providing loans to private companies, consumers and states, while Interacciones is an institution dedicated to financing infrastructure for state and municipal governments. The two financial institutions have concentrated nearly half of the loan portfolio in the sector, according to figures from the National Banking and Securities Commission (CNBV) at the end of December 2017.

One of the The results of the merger is that this will allow Banorte to offer cheaper loans because a larger bank will reduce its cost of financing, explained Carlos Rojo, general manager of Interacciones. If the acquisition is approved, Grupo Financiero Banorte will become the second largest financial group in Mexico only behind BBVA Bancomer.

"Grupo Financiero Banorte applied during this process, and will continue to apply, the international best practices in the field of financial institution responded in a press release

Banorte has already pointed out that it maintains a majority of independent members on its board of directors (73%), higher than the 25% established in Mexican legislation and 60% recommended by world best practices, according to figures shared by the institution in a press release on June 6, when it received the award for "Best Corporate Governance" from Ethical Boardroom

Plenary session of the Federal Commission for Economic Competition (Cofece) will discuss the concentration of these two financial entities.