After years of fighting to defend the share price of its flagship and After a months-long stock market halt, Mexican billionaire Ricardo Salinas Pliego will privatize Grupo Elektra.
Shareholders of the bank and appliance retailer voted in favor of delisting the shares at a meeting held on Friday, according to a notice. The Salinas family owns almost 75% of the shares, according to the latest annual report from last December.
The measure aims “reorganize and strengthen the company’s vast and diverse assets – digital and physical, national and international – and find financial tools to maximize their real value”said Elektra in a statement.
A new board of directors was also approved, in which Pedro Padilla, an old ally of Salinas, will assume the presidency and Salinas will assume the position of honorary president. The shares rose 6.5%, to 358.63 Mexican pesos (US$17.64).
Elektra shares plunged in early December when operations resumed after a four-month interruption caused by a legal dispute with a creditor. The pause caused its exclusion from Mexico’s main stock index, forcing index funds to sell the shares. It was the latest stage in a 12-year battle to keep the stock in the index.
Since it resumed trading, the stock has fallen below its book value – the value of the company’s equity on its balance sheet divided by the number of shares – of 419 Mexican pesos per unit (US$20.61). Under Mexican securities rules, Salinas will have to offer at least that amount, or the average of the last 30 days of trading, whichever is greater, in a possible takeover bid.
It’s unclear how much a takeover bid would cost Salinas. The company has already bought back about 6.2 million shares this month, or about 3% of its shares, according to exchange filings. These purchases cost Elektra about 2.2 billion Mexican pesos (US$108 million), according to the statements.
Motorcycles and Banks
Elektra stores are known as the distributor of Italika motorcycles, owned by Salinas, the best-selling in Mexico and preferred by the country’s workers. It is also the collection point for almost half of the more than US$60 billion in remittances sent to Mexico each year through its agreement with Western Union.
The company was founded in 1950 as a radio supplier and Salinas expanded its chain of stores until it became one of the country’s leading home appliance and mobile phone retailers, while growing Mexico’s number nine bank, Banco Azteca, in the back of the store, helping to finance customer purchases.
Analysts widely abandoned coverage of Elektra in the wake of Salinas’ 2012 battle with the Mexican stock market. Back then, the bourse moved to expel the stock from the IPC benchmark index over allegations that the company was manipulating the number of floating shares in the market. Ultimately, Elektra obtained a court order to secure its position, blocking sustained ETF flows.
The stock rose in the following years, reaching a record closing price of 1,631 Mexican pesos (US$80.24) in June 2021the most expensive in the country by far, even though trading volumes were a fraction of those of other companies.
Luciano Pascoe, director of the Salinas news network, ADN 40, and spokesperson for Grupo Salinas, He described the decision to delist as “brave” in a post on social networks.
“Speculation had put the company below its true value for a long time,” Pascoe wrote. “Today we are in a stronger position for a more prosperous future.”
Salinas published a video on his personal blog in which he avoided directly addressing the delisting and thanked his employees for a “great year.”
“Despite a complicated environment, despite the thousands of problems that always exist, we continue forward”said.
