Grupo Aval Acciones y Valores SA, Colombia’s biggest financial holding company, will seek to raise $500 million to $1 billion by listing shares in New York and may use the funds to buy banks in Central America and the Caribbean, Chief Executive Officer Luis Carlos Sarmiento Gutierrez said.
The company won’t sell stock in New York until preferred shares issued last month in Bogota, which have fallen 3.4 percent through yesterday, show a “more convincing” performance, Sarmiento, 50, said in an interview at his office in Bogota. Common shares in Grupo Aval have dropped 26 percent this year, the third-worst performer on Bogota’s IGBC index.
“In a couple of months, things will turn around,” the Cornell-educated executive said. Aval is in talks with four U.S. investment banks about helping to underwrite the New York listing, he said.
Aval raised $1.1 billion by selling the preferred shares last month, helping pay for last year’s $1.9 billion acquisition of General Electric Co.’s BAC Credomatic, Central America’s second-largest bank. It is the second-largest offering in Colombian history after state-controlled oil company Ecopetrol SA raised $2.7 billion when it sold a 20 percent stake in 2007.
Sarmiento said the company may use the capital raised in New York to fund acquisitions under consideration in El Salvador, Guatemala and the Dominican Republic.
Aval common shares traded in Bogota fell 1.6 percent to 1,265 pesos at 12:02 p.m. New York time.
Aval’s holdings include Banco de Bogota, Colombia’s second-biggest lender, Banco AV Villas and Banco de Occidente SA, the country’s fifth-biggest lender.
Banco de Bogota will sell bonds worth at least $1 billion this year in its first overseas debt issue, Sarmiento said. Its shares rose 1.5 percent to 53,800 pesos in Bogota.
Bancolombia SA, the country’s largest bank, is currently the only Colombian bank with ADRs listed in New York.
At least four Colombian companies are selling shares to finance expansions abroad.
Avianca Taca Holding SA , Colombia’s largest airline, and Grupo Nutresa SA, Colombia’s biggest food company, have issued stock this year to fund investment while Ecopetrol SA, Colombia’s largest oil company, and Grupo de Inversiones Suramericana SA, parent company of Colombia’s largest bank, have announced plans to do so.
Sarmiento is the son of Colombia’s richest man, Aval Chairman Luis Carlos Sarmiento Angulo. His fortune nearly doubled last year to $10.5 billion, making him the world’s 75th wealthiest person, according to Forbes magazine.
Banco de Bogota issued 2.5 trillion pesos of convertible debt as part of the BAC Credomatic transaction. Moody’s Investors Service last month increased the company’s foreign debt rating to Baa3, the lowest investment grade, from Ba2.
Sarmiento said the bank will take advantage of the “opportunity” created by the increase to sell bonds this year.
The company’s debt-to-equity ratio is at about 32 percent, compared to 3.2 percent for Grupo de Inversiones Suramericana, the parent company of Colombia’s biggest bank, according to Felipe Toro, a financial analyst at Interbolsa SA, Colombia’s biggest brokerage. Sarmiento said the ratio used by Toro isn’t the most accurate measure and that the tangible equity ratio, which was 13.1 percent as of September 2010, should be used to assess the holding company’s debt.
“That’s the way I would look at it and I think it shows that we’re very adequately capitalized,” he said.
Beginning with Aval’s 2011 first-quarter earnings set for release this month, the group will begin publishing quarterly reports that consolidate the company’s results so shareholders can draw comparisons with Colombian banks, he said. Aval’s 2010 net income fell 15 percent from the year before to 927 billion pesos ($515 million).
Sarmiento, who took over management of the company in 2000 after his return from 19 years abroad, has been “more aggressive” in expanding outside of Colombia than his father, who is headed toward retirement at 78, Toro said.
Sarmiento Angulo turned a small business in low-income housing and infrastructure into a financial empire during the nation’s four-decade conflict with Marxist guerrillas and drug traffickers, Sarmiento said.
Sarmiento said he doesn’t expect his father to retire “anytime soon.”
In 1983, at the height of the government’s U.S.-backed battle with drug cartels, Sarmiento’s younger sister was kidnapped for more than six months before she was released for ransom.
Kidnappings and homicides related to the drug trade fell 92 percent and 45 percent respectively from 2002 to 2009, with the help of more than $7 billion in U.S. anti-narcotics and counterinsurgency aid, according to Colombia’s Defense Ministry.
Sarmiento says he still takes precautions. A visit to his office requires checking in with a receptionist who keeps an Uzi in his desk.
“My mission is to take the company to the next step, make it larger, more profitable,” Sarmiento said. “Somebody’s just got to carry the torch.”