SANTIAGO Chile's CorpGroup has signed a deal to buy up to 100 percent of the shares of Colombia's Helm Bank for around $1.3 billion it said on Tuesday, in what would be a Chilean financial firm's biggest purchase abroad and create Colombia's fifth largest bank.
The deal entails CorpGroup's CorpBanca Colombia and Helm BCR.CN merging to create a group, controlling more than 7 percent of the Colombian market, and having more than $11.8 billion in total assets. The new entity would generate more than $100 million in annual synergies, post taxes.
The preliminary share price is $0.2809 per share, Helm Group said, and the deal should be completed during the first quarter of 2013, pending regulatory approval.
"With this purchase and subsequent merger, CorpBanca will consolidate its operations in Colombia, reaffirming its long-term commitment to that market," CorpBanca said in a subsequent press release.
Chile and Colombia, two small, booming Latin American countries, have strengthened their business and financial ties in recent years. Many Chilean companies, ranging from retail firm Cencosud CEN.SN to state copper giant Codelco CODEL.UL, have or are seeking a presence in Colombia, to take advantage of the country's low inflation rate, natural resources and domestic demand.
Last week, Colombia unveiled a tax reform bill aimed at creating jobs, closing loopholes and simplifying the tax system, but not increasing the tax take as the Andean country was on track for record collections this year.
Chilean investments in Colombia have jumped dramatically in recent years, from 1 percent of total direct foreign investment in 2010, rising to 12 percent in 2011, and then surging to 30.4 percent in the first quarter 2012, according to government agency Proexport Colombia.
CorpBanca said in December it had struck a deal to buy Banco Santander Colombia for $1.225 billion. Spain's Santander is selling assets in Latin America to help shore up its finances at home.
FUNDING THE PURCHASE, FINE PRINT
CorpGroup's local CorpBanca COB.SN and CorpBanca Colombia units will propose capital increases of roughly $600 million and up to $1 billion, respectively, the group said in a statement to Chile's market regulator on Tuesday.
Helm Bank has a 4 percent share of the Colombian market and holds $6.6 billion in assets. CorpGroup said the deal also entails buying 80 percent of the insurance brokerage Helm Corredor de Seguros for $17.12 million.
CorpGroup said last week's announcement that the World Bank's private investment arm, International Finance Corp (IFC), had agreed to buy a 5.0 percent stake in CorpBanca for $225 million was part of CorpBanca's planned capital increase.
CorpBanca added in the press release it intends to issue debt abroad.
Helm Bank's owners have agreed to subscribe around $440 million of CorpBanca Colombia's capital increase.
The final price per share will be announced the day the transaction closes, CorpGroup added.
The acquisition agreement includes a daily fee if the transaction is not closed by January 1, CorpGroup said.
Shares in CorpBanca rebounded to trade 0.52 percent higher after trading down over 1 percent in Tuesday morning trade, while Chile's blue-chip IPSA .IPSA stock index remained broadly flat. Helm Bank's shares rose 1.64 percent on Tuesday after the announcement.
(Reporting by Antonio de la Jara and Alexandra Ulmer. Additional reporting by Jack Kimball in Bogota.; Writing by Alexandra Ulmer; Editing by Theodore d'Afflisio)