Promerica Agrees to Buy Ecuador Bank Stake for $143 MillionNathan Gill
Promerica Financial Corp., the operator of Nicaragua’s biggest bank, agreed to acquire a 55 percent stake in Ecuador’s third-largest publicly traded lender, Banco de la Produccion SA, for about $143 million.
Promerica requested approval from Ecuador’s antitrust regulator to take control of the Quito-based bank, which is valued at $260 million, and expects the transaction to close in less than 30 days, said Ricardo Cuesta, the executive president of Promerica’s Ecuador unit. He said closely held Promerica will use a combination of its own funds and private loans to finance the purchase of the lender, also known as Produbanco.
The deal would be the first sale of an Ecuadorean bank to foreign investors since President Rafael Correa tightened regulations to force local lenders to divest noncore units in 2012 and raised taxes this year on banks to help fund anti-poverty programs. Nongovernmental banks’ net profit through November was 21 percent lower than in the same period of 2012, according to Ecuador’s bank regulator.
“We feel comfortable with the risks,” Cuesta said today in a phone interview from Quito, citing the company’s previous operations in Ecuador and other Latin American countries. “The idea would be to have the formal part finished in a few weeks.”
Promerica, which has operations in Costa Rica, the Dominican Republic, El Salvador, Guatemala and Panama, plans to combine its local operations with Produbanco after it completes the purchase to help lower costs, Cuesta said. The merger would require approval from bank regulators and should be finished by the end of 2014, he said.
Net profit at Produbanco declined 21 percent to $24.4 million from January through November compared with the same period in 2012, according to the bank regulator. The bank’s shares have fallen 14 percent this year to $1, according to data compiled by Bloomberg. Shares were unchanged today.
Produbanco press officials didn’t respond to a telephone message seeking comment.
The new banking rules enacted under Correa came on top of measures to force lenders to shed their brokerages, insurance units and other noncore businesses, increase holdings of government-issued debt and eliminate charges for some services, including credit-card issuance.