BBVA Frances Said to Face Hurdles in Bid for Banco Patagonia

  • First Argentine lender to adjust balance sheet to inflation
  • Tax agency inspects; central bank may oppose BBVA Frances bid

BBVA Banco Frances SA may face regulatory hurdles in its attempt to acquire Banco Patagonia SA after defying the nation’s tax policy. The shares fell, erasing gains.

The Argentine central bank and tax agency are raising concerns that may cost Buenos Aires-based BBVA Frances regulatory approval if it wins the bid, according to two people with knowledge of the matter who asked not to be named because final bids are due Thursday.

BBVA Frances refused to pay $74.2 million of its 2016 income taxes and went to court to challenge the policy that companies can’t adjust their balance sheets for inflation, becoming the first lender to defy the tax agency known as AFIP. Inflation in Buenos Aires city ended at 41 percent in 2016.

Shares traded in New York fell 0.6 percent to close at $18.92 after the report.

The central bank ordered BBVA Frances last month to account for the money in case it loses the court challenge. The tax agency inspected the company’s books this week and says it opposes the practice of adjusting balance sheets for inflation.

The lender will probably submit a binding offer to acquire a controlling stake of Patagonia from the state bank Banco do Brasil on Thursday. The two other bidders are Itau Unibanco SA and Banco Macro SA. A representative from JPMorgan Chase & Co., which is advising Banco do Brasil, declined to comment in an email.

Coordinated Action

While BBVA Frances may be paying less taxes until the matter is resolved in court, the two agencies have already discussed opposing a winning bid from BBVA Frances, the two people said. Fernando Meanos, central bank spokesman, declined to comment on an ongoing M&A deal being conducted by private parties. The central bank is the final regulatory authority on bank M&A. AFIP spokesman Jorge Speraggi confirmed the inspection and declined to comment about any potential M&A, which the tax agency doesn’t have authority over.

A representative from the Argentine unit of the Spanish Banco Bilbao Vizcaya Argentaria SA declined to comment on the bidding and potential regulatory outcome by phone.

Banco do Brasil, the biggest bank by assets in Latin America, hired JPMorgan in 2016 to help it sell Banco Patagonia. Its 58.6 percent stake would go to strategic investors, with additional shares being sold in a public offering, according to a May filing. Banco do Brasil needs to raise capital to offset deepening losses from bad loans. The three banks were shortlisted in May after having offered about $1.35 billion in the non-binding offer round. Grupo Financiero Galicia SA was rejected after submitting a $1.2 billion bid, the lowest offer.

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