Walk through Colombia’s second city, Medellín, and you’re never far from a bank, office or store controlled in one way or another by Grupo Empresarial Antioqueño, the country’s most powerful corporate alliance.
On street corners, there are branches of Bancolombia, the country’s largest bank. Inside the gleaming glass towers are the headquarters of Grupo de Inversiones Suramericana, Colombia’s largest financial conglomerate, which holds stakes in banking, insurance, pensions and asset management. Buy food in the city’s supermarkets and chances are it’s made by Grupo Nutresa, which started life as a Medellín chocolate maker over a century ago and is now one of Latin America’s largest processed food firms.
All these companies, and over 100 others, are part of GEA, a network of firms in Medellín and the surrounding department of Antioquia, linked to each other through a complex network of shares and family ties. Between them they account for over half the value of Colcap, the main index of the Colombian stock market.
Group structure, similar to that of Japan keiretsu, in which companies are closely related to each other, has made these firms almost unquestionable for external acquisitions. Indeed, that’s why the group was created in the first place, to protect Medellín-based companies from a takeover by Bogotá in the 1970s.
But now, as never 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 crack GEA’s tightly knit 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-shares were great for managers to keep control, but what did shareholders get?”
Gilinski’s bids have rattled Colombia’s otherwise moribund stock market and sent ripples across the region, where hostile takeover bids are relatively rare.
“We’ve had acquisitions before in Colombia, but the difference this time is that they’re hostile and they’re big,” said Juan Camilo Jiménez, head of equities at Credicorp Capital in Bogota. “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 level.”
Gilinski’s six consecutive bids have targeted three major GEA companies – Sura, Nutresa and industrial conglomerate Grupo Argos. Gilinski and his partners have spent about $2.8 billion — more than half of his personal fortune, according to Forbes — and have signaled their intention to keep going.
They now own 38 percent of Sura and 31 percent of Nutresa. This gives them indirect shares in Bancolombia and other important GEA companies.
But GEA is struggling. Her companies have made strategic appointments to their boards to eliminate conflicts of interest among board members, allowing them to maximize their voting capacity in the face of Gilinski’s attack.
“This has made Gilinski’s goal of dismantling GEA from within a much more difficult proposition,” said Luis Ramos, senior Colombian analyst at regional asset management firm LarrainVial.
Those working at GEA companies spoken to by the FT – at Sura, Argos and energy company Celsia – reject Gilinski’s criticism that they have failed investors.
“The value of Grupo Sura’s total capital has increased 36 times in size over the past 20 years,” chief executive Gonzalo Pérez told the FT in an interview in Medellín. “Our dividends over the same period have grown at a compound annual growth rate of 10 percent per year.”
They also argue that they should be judged not only on share prices and return on investment, but also on their contribution to local communities. Sura has invested approximately $70 million over the past decade in social, educational and cultural projects in Colombia and elsewhere in Latin America.
“These companies have provided social and economic value in the most complex times both in Medellín and in the country as a whole,” said María Bibiana Botero, executive director of Proantioquia, a foundation that promotes development in the region. “They stood firm during the drug violence and recently during [coronavirus] pandemic, their contributions were crucial in dealing with the medical emergency in the region. They saved lives.”
But the group has its critics even in its Medellín stronghold, among them outspoken leftist Mayor Daniel Quintero, who, in an interview this year with Semana, a news magazine that Gilinski bought in 2020, called GEA among a the group of entities that he claims have destroyed the city’s finances.
However, Quintero has not provided any evidence for his claims and declined to speak to the FT for this article. Some of the GEA firms have threatened to sue Quintero for defamation.
The outcome of the battle will be felt beyond Colombia’s borders. Between them, GEA companies reach far beyond the country. Grupo Sura operates in 11 Latin American countries. Nutresa exports to over 70 countries worldwide.
GEA generates approximately 6 percent of Colombian GDP, according to Proantioquia.
“GEA firms have been one of the engines of development in the region and have micromanaged every part of public policy in Medellín and Antioquia for decades,” said Javier Mejía, a Colombian economist who has researched the group in depth. “For a long time, they were really the only channel through which people could enter the formal economy in Antioquia.”
For now it appears Gilinski’s bids may have stalled. His most recent share build in Nutresa in May and Argos in July was not at the level he was looking for.
LarrainVial’s Ramos predicted that this could cause “a pause in the Gilinski v GEA saga” over the coming weeks and months. However, he added: “but Gilinski’s large investment in GEA companies suggests that this is not the last installment.”
