Strolling through Colombia’s second city, Medellin, you will always be far from a bank, office or store that is somehow controlled by Grupo Empresarial Antioqueño, the most powerful company alliance in the country.
On the corner of the streets are the branches of Bancolombia, the country’s largest bank. The gleaming glass towers house the headquarters of Grupo de Inversiones Suramericana, Colombia’s largest financial conglomerate with interests in banking, insurance, pensions and asset management. Buy food in the city’s supermarkets, and chances are it’s produced by Grupo Nutresa, which started as a chocolate maker in Medellin more than a century ago and is now one of Latin America’s largest food processing firms.
All these companies and more than 100 others are part of GEA, a network of firms in Medellín and the nearby department of Antioquia, linked together through a complex web of cross-shareholdings and family ties. They account for more than half the value of Colcap, the main index of the Colombian stock exchange.
The structure of the group is similar to Japanese keiretsu in which companies are closely related to each other, has made these firms almost impenetrable to outside takeovers. Indeed, that’s why the group was created in the first place, to protect Medellín-based companies from takeovers from Bogotá in the 1970s.
But now, more than ever before, GEA is under attack.
Late last year, Colombian businessman Jaime Gilinski, in partnership with the Abu Dhabi royal family, launched a series of hostile bids to break GEA’s tight structure. Gilinski says the firms failed their investors.
“Management was not paying attention to shareholders,” he told the Financial Times in a recent interview in London. “Cross-share ownership was great for managers to keep control, but what did shareholders get?”
Gilinski’s proposals shook Colombia’s normally moribund stock market and sent ripples throughout the region, where hostile takeover bids are relatively rare.
“We’ve had takeovers in Colombia, but the difference this time is that they’re hostile and big,” said Juan Camilo Jimenez, head of equities at Credicorp Capital in Bogotá. “These are powerful companies not only because of their weight in the stock market, but also because of their importance at the national and regional levels.”
Gilinski’s six consecutive bids targeted GEA’s three main companies — Sura, Nutresa and industrial conglomerate Grupo Argos. Gilinski and his partners have spent about $2.8 billion — more than half of his personal wealth, according to Forbes — and have said they intend to continue.
They now own 38 percent of Sura and 31 percent of Nutresa. This gives them indirect stakes in Bancolombia and other important GEA companies.
But GEA is fighting back. Her companies made strategic appointments to their boards to eliminate conflicts of interest among board members, allowing them to maximize their voting power in the face of Gilinski’s attack.
“This made Gilinski’s intention to unravel GEA from the inside much more difficult,” said Luis Ramos, senior analyst at regional asset manager LarrainVial in Colombia.
Those working at GEA companies spoken to by the FT – at Sura, Argos and energy company Celsia – rejected Gilinski’s criticism that they had failed investors.
“The value of Grupo Sura’s total capital has increased 36 times over the past 20 years,” chief executive Gonzalo Perez told the FT in an interview in Medellin. “Our dividend has grown 10 percent a year over the same period.”
They also argue that they should be judged not only by their share prices and returns on investments, but also by their contribution to the development of local communities. Over the past decade, Sura has invested around $70 million in social, educational and cultural projects in Colombia and other Latin American countries.
“These companies have provided social and economic value in the most difficult times, both for Medellin and for the country as a whole,” said María Bibiana Botero, executive director of Proantioquia, a foundation that promotes development in the region. “They endured during the drug violence, and recently during [coronavirus] pandemic, their contribution was crucial in solving the emergency situation in the region. They saved lives.”
But the group has critics even in its Medellin stronghold, among them the outspoken left-wing mayor Daniel Quintero, who in an interview this year with Semana, the news magazine Gilinski bought in 2020, named GEA among a group of organizations he claims have been stripped of finances. cities
However, Quintero did not provide any evidence for his claims and declined to speak to the FT for this article. Some GEA firms threatened to sue Quintero for defamation.
The outcome of the battle will be felt beyond Colombia. GEA companies go far beyond the borders of the country. Grupo Sura operates in 11 Latin American countries. Nutresa exports to more than 70 countries around the world.
GEA generates approximately 6 percent of Colombia’s GDP, according to Proantioquia.
“GEA firms were one of the engines of development in the region and for decades controlled every part of public policy in Medellin and Antioquia,” said Javier Mejia, a Colombian economist who has studied the group in depth. “For a long time, they were the only channel through which people could access the formal economy in Antioch.”
For now, it appears that Gilinski’s bids have stalled. His most recent opening at Nutresa in May and Argos in July fell short of the level he was aiming for.
LarrainVial’s Ramos predicted this could lead to a “pause in the Gilinski v GEA saga” over the next few weeks and months. However, he added: “but Gilinski’s large investment in GEA suggests that this is not the last installment.”