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Grupo Mexico offer for 100% of Banamex has slightly higher

valuation than Fernando Pardo deal

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Analysts suggest Grupo Mexico's offer could trigger

bidding war

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Citigroup ( C/PN ) still prefers IPO to divest, but will review

offer

By Tatiana Bautzer

NEW YORK, Oct 6 (Reuters) - Citigroup ( C/PN ) still plans

to pursue an IPO for its Mexican retail unit even after

receiving a new offer by mining and transportation conglomerate

Grupo Mexico, Citi said in a statement on Monday.

The competing bid comes after Citi

announced

last month it would sell a 25% stake in Banamex to local

billionaire Fernando Chico Pardo, who chairs airport operator

ASUR, at 0.8 times the book value.

"We remain committed to realizing the full value of Banamex

for our shareholders, and the agreement we announced with

Fernando Chico Pardo and the proposed IPO continues to be our

preferred path to delivering that outcome," the bank said. "Of

course, we will review Grupo Mexico's offer in a responsible

manner and consider, among other risk factors, the ability to

obtain required regulatory approvals and the certainty of

closing a proposed transaction."

Citi will also sound out top Mexican investors in the coming

months to

buy minority stakes

smaller than Pardo's, it said last month.

Grupo Mexico, controlled by German Larrea, is offering to

buy Citi's retail unit more than two years after it had scrapped

previous plans to do so. At the time, Larrea withdrew the offer

as tensions with the administration of then-President Andres

Manuel Lopez Obrador led the two sides to abandon an agreement.

Under its offer, Grupo Mexico would purchase 25% of Banamex at

0.85 times its book value, and the remaining 75% at 0.80x book

value, it said. That would mean a slightly higher value than

what was offered by Pardo.

Grupo Mexico shares fell more than 15% in late morning trading.

Even before tensions with the government, talks with Larrea had

been repeatedly delayed, according to a person with knowledge of

the previous talks who declined to be identified discussing

private negotiations.

Citi is aiming to fetch a higher IPO price than the

valuation it set with Pardo, which is seen as a floor for the

share price, and the slightly higher price offered by Grupo

Mexico would not be a deciding factor, the source said.

Citi paid $12.5 billion for Banamex in 2001. The offer could

trigger a bidding war, Bradesco analyst Rodolfo Ramos wrote in a

report.

"Larrea's wallet size reduces the likelihood that Chico will be

compelled to counter, perhaps together with other business

groups, but Citi's next move will likely be defining in how we

proceed from here," Ramos wrote. "Media perception of these two

billionaires is clear; both have shied away from public scrutiny

and presence, but Larrea has never backed out of a good legal

fight, and Chico, aside from those of us closely following

Mexico's airport industry, is a lesser-known businessman."

Grupo Mexico shares may become more volatile if Larrea decides

to increase its bid, Ramos added.