MEXICO CITY (Reuters) - Bank Grupo Financiero Banorte said on Wednesday it had signed an agreement to acquire closely linked peer Interacciones in a cash-and-stock deal that would create Mexico’s second-biggest financial group.
Banorte offered 13.7 billion pesos ($719.39 million) in cash and 109.7 million of its shares in the deal that would formally join two lenders whose respective chairmen are father and son.
Subsidiaries of Grupo Financiero Interacciones (GFINTERO.MX) would be absorbed by Banorte in the deal, the two lenders said.
Rumors of a takeover had circulated since Carlos Hank Gonzalez stepped down as chief executive of Interacciones three years ago to join the board of Banorte (GFNORTEO.MX), where he is now chairman of the bank his grandfather once headed.
Shares in Banorte fell by as much as 10 percent. At Wednesday’s close, they were down 9.29 percent at 106.43 pesos a share, while Interacciones shares were up 0.64 percent at 104.9 per share.
The deal is subject to approval by shareholders of both lenders and by Mexico’s competition and financial regulators. The banks are completing due diligence, they said.
The two banks are already intimately entwined as part of the powerful Hank family, which has roots in the State of Mexico, home of Mexican President Enrique Pena Nieto.
Carlos Hank Gonzalez was at Interacciones for 14 years before moving to Banorte, which was long chaired by his grandfather Roberto Gonzalez. His father, Carlos Hank Rhon, chairs Interacciones and owns about 40.67 percent of its shares.
Banorte’s top shareholders are a series of trusts and bank holdings, according to its 2016 annual report. It says no executive or board member as an individual directly controls more than 1 percent of the shares.
When Hank Gonzalez moved to Banorte, Interacciones said it did not necessarily mean the two groups would merge.
The deal was first reported on Wednesday by several of Mexico’s national newspapers.
Interacciones has a market capitalization of about 28 billion pesos ($1.49 billion) according to Thomson Reuters data. By comparison, Banorte is worth some 327 billion pesos.
Both companies said that their audit and company practices committees approved the deal, without the presence of members that could have a potential conflict of interest.
Reporting by Sheky Espejo and Noe Torres; Writing by Christine Murray; Editing by Dave Graham and Peter Cooney