The battle for Colombia’s most powerful business group

Walk around Colombia’s second city Medellín and you are never far from a bank, office or shop that is controlled in some way or other by the Grupo Empresarial Antioqueño, the most powerful alliance of companies in the nation.

On street corners, there are branches of Bancolombia, the country’s biggest bank. Within gleaming glass towers sit 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 the chances are it is produced by Grupo Nutresa, which started life as a Medellín chocolate-maker over a century ago and is now one of Latin America’s biggest processed food firms.

All these companies, and over 100 more, are part of the GEA, a network of firms in Medellín and the surrounding department of Antioquia linked to one another through a complex web of cross-shareholdings and family ties. Between them they account for over half the value of the Colcap, the main index of the Colombian stock exchange.

The group’s structure, similar to Japan’s keiretsu, in which companies form close affiliations with each other, has made these firms almost unassailable to outside takeovers. Indeed, that is why the group was set up in the first place, to protect Medellín-based companies from takeovers from Bogotá in the 1970s.

But now, as never before, the GEA is under attack.

Late last year, Colombian businessman Jaime Gilinski, in partnership with the Abu Dhabi royal family, launched a series of hostile tender offers to crack open the GEA’s tight-knit structure. Gilinski says the firms have failed their investors.

“The management was not paying attention to shareholders,” he told the Financial Times in a recent interview in London. “The cross-shareholdings were great for the managers to keep control, but what were the shareholders getting?”

The Gilinski bids have shaken up Colombia’s otherwise moribund stock exchange and sent ripples throughout the region, where hostile takeover bids are relatively rare.

“We’ve had takeovers 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 Bogotá. “These are powerful companies, not only because of their weight on the stock market but also because of their importance at a national and regional level.”

Gilinski’s six successive bids have targeted the three core GEA companies — Sura, Nutresa and industrial conglomerate Grupo Argos. Gilinski and his partners have spent around $2.8bn — more than half his personal net worth, according to Forbes — and have signalled their intent to keep going.

They now own 38 per cent of Sura and 31 per cent of Nutresa. That gives them indirect stakes in Bancolombia and other important GEA companies.

But the GEA is fighting back. Its companies have made strategic appointments to their boards to eliminate conflicts of interest among board members, allowing them to maximise their voting capacity in the face of Gilinski’s assault.

“That has made Gilinski’s intention of unravelling the GEA from within a much harder proposition,” said Luis Ramos, senior Colombia 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 criticisms that they have failed investors.

“The value of Grupo Sura’s total equity has grown 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 per cent per year.”

They also argue they should be judged not only on their share prices and return on investment but also on their contribution to local communities. Sura has ploughed around $70mn over the past decade into 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 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 the [coronavirus] pandemic their contributions were decisive 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 the outspoken leftwing mayor Daniel Quintero, who, in an interview this year with Semana, a news magazine that Gilinski bought in 2020, named the GEA among a group of entities that he claims have sacked the city’s finances.

However, Quintero has provided no 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 countries in Latin America. Nutresa exports to over 70 nations worldwide.

The GEA generate roughly 6 per cent of Colombian GDP, according to Proantioquia.

“The 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 by which people could access the formal economy in Antioquia.”

For now it looks like Gilinski’s bids may have stalled. His most recent stakebuilding at Nutresa in May and Argos in July fell short of the level he was seeking.

LarrainVial’s Ramos predicted this might prompt “a pause in the Gilinski versus GEA saga” over the next few weeks and months. However, he added: “but Gilinski’s heavy investment in GEA companies suggests this is not the last instalment”.