The world's largest money manager BlackRock should soon be selling its products in Mexico after agreeing to buy Citibanamex's fund management unit, taking over management of nearly US$31bn in existing assets.

The deal will create a partnership where BlackRock will manage the assets and Citibanamex continues to handle client relations.

The assets in question consist of bonds, stocks and mixed­investment assets, primarily held by retail investors, according to a statement from Citibanamex. The deal is pending regulatory approval, which is expected to wrap up in the second half of 2018. The terms were not disclosed.

The move marks yet another adjustment to Citigroup's Latin American footprint, following divestment of assets in Brazil, Argentina, Costa Rica, Honduras, Nicaragua, Panama, Guatemala and Peru.

However, in Mexico, the firm has doubled down, changing the name of its Mexican subsidiary to Citibanamex from Banamex and injecting US$1.3bn into the rebranded company for branch and technology improvements.

Part of M&A trend

Cristina Sánchez, research and business intelligence analyst at Transactional Track Record (TTR), told BNamericas that the deal is part of a larger industry trend.

"BlackRock's purchase of Citibanamex's investment fund management business is a reflection of the boom the finance and insurance sector has been seeing in the Mexican M&A market," said Sánchez, who added that TTR has seen a YTD increase in the sector's transaction volume compared to previous years.

"BlackRock has already shown its interest in making investments in Mexican assets, and not only in the financial sector, but also other areas such as real estate, a sector with great movement in the country as well," said Sánchez, adding that the magnitude of the deal bodes well for M&A activity next year.

Partnership particulars

Citibanamex general director Ernesto Torres Cantú (pictured) provided details of the BlackRock partnership in a call with the media.

"Our goal is to be the benchmark for banking in Mexico, focused on providing a more complete, intelligent and intuitive experience to those who do business with Citibanamex," said Jane Fraser, CEO of Citi Latam, in a statement. "The agreement with BlackRock is in line with our commitment, by providing our clients with the best asset management services and giving BlackRock access to our extensive network in Mexico."

Citibanamex has some 1,500 branches throughout Mexico and more than 20mn clients using its services.

BlackRock's interest in a deal with Citibanamex was driven by the funds industry's low penetration in Mexico, local daily El Financiero reported Armando Senra, BlackRock's director for Latin America, Spain and Portugal, as saying on the call.

"There is already an evolution of investors," said Senra. "They are looking for more sophisticated solutions, and that is why we seek to accelerate the growth of the industry."

"BlackRock believes in Mexico's growth potential in the long term and is committed to continue to increase our presence here," said Mark McCombe, BlackRock's regional director for the Americas. "Combining BlackRock's product and technology capabilities with Citibanamex's distribution network creates a stronger franchise that can offer more to its customers."

Source: Business News Americas / BN Americas - Chile