Mexico Seizes Grupo Mexico Railway

Posted on 05/24/2023

Mexico’s government has seized a Grupo Mexico railway. Grupo Mexico is a publicly-traded corporation. Despite some initial volatility, the share price remained stable. Analysts say Mexico President Andres Manuel Lopez Obrador (AMLO) could cause real concerns in the country’s investment landscape. Mexico’s president believes that the seizure was “legal.” The Mexican Supreme Court disagreed, but it is unclear whether that will have any impact.

Mexico has been interested in running retail banking operations also, specifically Citigroup’s assets in the country. Citigroup had been closing in on a deal to sell much of Banamex to Grupo Mexico for about US$ 7 billion. Germán Larrea Mota-Velasco, a mining billionaire (with a net worth of US$ 29.2 billion) who leads Grupo Mexico and is also in the running to take over Citigroup’s assets, asked the government to pay for the confiscated track. Larrea wanted US$ 531 million for the 75 miles that were nationalized. However, Citigroup on May 24, 2023 revealed its plans to pursue an initial public offering of its Mexico business, Banamex, killing a 16-month effort to find a buyer for the unit. The Wall Street bank expects to complete the separation in the second half of 2024, with a public offering likely to follow in 2025, Citigroup said in a release.

“After careful consideration, we concluded the optimal path to maximizing the value of Banamex for our shareholders and advancing our goal to simplify our firm is to pivot from our dual path approach to focus solely on an IPO of the business,” Citigroup CEO Jane Fraser said in the release.

Larrea Mota-Velasco has been chairman, president and CEO of Grupo Mexico since 1994.

Mexico’s economy had been considered a bright spot. The Mexican economy grew by 3.1% in 2022, after a bounce back of 4.7% in 2021. The economy has recovered its employment and Gross Domestic Product from pre-pandemic levels. It is the 15th largest economy in the world. However, the actions of the president may impact growth prospects. Forbes calls him “incompetent and untrustworthy.” U.S. President Joe Biden has had friction with him over the drugs crisis and alleged U.S. spying inside Mexico.

Keywords: Grupo Mexico S.A.B. de C.V.

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