Banco Union, Venezuela's fourth-largest bank, is trying to talk Citigroup into raising the price of an option it granted the New York banking company to acquire a 52% stake.
The option was granted as collateral in the event Banco Union defaulted on a $140 million loan from Citigroup. Resolving a default this way would value the acquired shares at $2.70 apiece. Venezuelan banking sources say Ignacio Salvatierra, the bank's president, is holding talks with Citigroup in hopes of raising the strike price to $3.50 a share.
The loan expired at the end of April but has been extended to the end of May, Venezuelan banking sources said.
In New York last week, Citigroup declined to comment.
The acquisition would make Citigroup, which already operates in Venezuela, the third-largest bank there, with more than $2 billion of assets.
The move would continue a trend toward foreign ownership of Venezuelan banks. Foreign banks now control roughly half the country's $25 billion of banking assets, up from virtually nothing in 1993.
Foreign takeovers are the result of the country's financial crisis this decade that prompted the government to close or take control of 19 banks holding slightly more than half the country's banking assets.
The crisis, however, also prompted the government to lift controls on foreign ownership, leading to an influx of foreign banks, including Spain's Banco Bilbao Vizcaya and Banco Santander. Chase Manhattan Corp. also opened a subsidiary, and Bank of America Corp. opened a branch.
Citigroup opened an office in Venezuela in 1917 and now has seven branches, including three in Caracas, one in Valencia, and one in Maracaibo. As of March 1998, the U.S. group held $468 million of assets in Venezuela, or 2.6% of total banking assets.
