Bloomberg News

UBS Investing $506 Million in Sura After ING Asset Purchase

November 24, 2011

(Updates closing price in third paragraph.)

Nov. 23 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, invested $506 million in Grupo de Inversiones Suramericana SA, helping the Medellin-based company raise funds to pay for its purchase of Latin American assets from ING Groep NV.

UBS bought 30 million shares for an average 32,500 pesos each, part of a sale of 120 million shares that raised 3.5 trillion pesos ($1.8 billion) in the biggest Colombian share offering in four years. The parent company of Colombia’s biggest lender said earlier this year it would raise as much as 3.9 trillion pesos in a share sale to help pay for the 2.7 billion euro ($3.6 billion) purchase of ING assets.

While luring the Swiss bank is good, Sura’s shares are dropping because the company did not attract enough demand to reach its 3.9 trillion peso target for the share sale, said Santiago Melo, analyst at Alianza Valores SA. Shares of Sura fell 4.9 percent to 29,900 pesos, the lowest level since July 2010, at 4 p.m. Bogota time.

“There was a large expectation that the offering was going to meet its target or be oversubscribed,” Melo said.

The sale price was 3.4 percent above yesterday’s closing price of 31,440 pesos.

Grupo Sura agreed in July to buy ING’s pensions, life insurance and investment management operations in Chile, Colombia, Mexico, Uruguay and Peru. The Colombian company has also said the International Finance Corporation, Sociedad Bolivar SA and a third co-investor will help fund the purchase with a combined total of as much as $900 million.

Biggest in Four Years

“In spite of the particularly adverse conditions on the markets both at home and abroad, we have been able to achieve our objective of financing the ING acquisition with funds from an issue of shares and other sources,” Sura’s CEO David Bojanini said in a PRNewswire statement today.

Sura’s share offering was Colombia’s biggest in four years, said Jairo Agudelo, an analyst at Celfin Capital in Medellin.

“With the funds they’ve raised, they would only have to get about another $500 million in debt for the ING purchase, which is not very significant for the company and shouldn’t lead to a downgrade,” Agudelo said.

Standard & Poor’s said July 27 it may cut the company’s ratings to junk as “incremental indebtedness” from the ING acquisition could weaken the company’s ability to repay debt. S&P put its ratings of Sura on CreditWatch with negative implications.

Latibex Top Index

The share sale, along with co-investors and $500 million cash on hand would leave the company with a “very low level of additional debt,” Andres Bernal, the company’s vice president of investment, said in an e-mailed response to questions.

“I hope S&P sees all this as very positive!” Bernal said in the e-mail.

The company said it will be included in the FTSE Latibex Top Index, which consists of the 15 most capitalized and liquid securities on the broader Latibex All-Shares Index, as of Dec. 1, according to a Nov. 21 regulatory filing.

Colombian share offerings since October, including those of Ecopetrol SA, Empresa de Energia de Bogota SA and Banco Davivienda SA, failed to attract enough demand to meet their maximum targets amid reduced appetite for emerging-market assets on concerns about the debt crisis in Europe and slowing global growth, said Melo.

State-controlled Ecopetrol, Colombia’s largest oil company, raised $2.7 billion in a 2007 offering.

Potential Co-Investor

Bernal said the third “co-investor” in the ING purchase is a U.S.-based private international fund, without giving further details, and that the company is considering the possibility of a fourth co-investor that could add an additional $100 million.

He said the ING transaction can be closed once the purchase receives complete regulatory authorizations in Mexico, Colombia, Peru, Chile and Uruguay, which could happen as soon as next month.

UBS spokeswoman Hana Dunn in London couldn’t immediately comment.

--Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporters on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net; Blake Schmidt in Bogota at bschmidt16@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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