UK investment firm Infund LLP (“Infund“) has filed a civil lawsuit in Mexico against Germán Larrea Mota Velasco (“Larrea“), CEO and controlling shareholder of Grupo Mexico, SAB de CV (“GMexico“) claiming breach of Infunds 2003 subscription for approximately 65 million shares of GMexico equity. The action, filed in Mexico City, alleges breach of contract.
Upon filing the suit in Mexico City, a district court ruled to freeze the disputed securities, restricting, among other things, transfer and voting of the shares while the claims are litigated. The disputed shares which have been the subject of numerous stock splits and dividends, have ballooned in value to in excess of US $2 billion and now account for approximately seven percent of GMexicos outstanding equity. Larrea and his family have a 51 percent controlling stake in GMexico, the giant Mexican mining and railroad conglomerate that operates railroads and mines throughout Mexico as well as Texas and Arizona through its subsidiaries ASARCO and Texas Pacifico Transportation, among others.
At issue in the suit is Infund’s approximately US $75 million subscription for GMexico shares, which Infund alleges Larrea failed to deliver. The cornerstone of a crucial US $230 million capital raise that sought to alleviate GMexicos 2003 liquidity crunch, Infund’s “commission agreement” mandated a US $75 million advance by Infund to Larrea and a simultaneous underwriting by Larrea to Infund of approximately 65 million GMexico Series B Coupon 5 shares. Infund, managed at the time by Hector Garcia Quevedo Topete, long-time confidant to Larrea family patriarch Jorge Larrea, funded the US $75 million as required. However, the younger Larrea is alleged to have misappropriated the shares to his accounts, where they are believed to remain despite Infund’s repeated attempts to settle the trade.
Without Infunds subscription and payment through its commission agent Larrea, Grupo Mexicos capital raise would have failed, said José Antonio Marván Lizardi, Infunds Mexico City spokesman. The facts are straightforward here: Infund timely fulfilled its US $75 million funding obligation as part of Grupo Mexico’s vital capital raise, but never received the shares that were paid for its time for this trade to be settled, explained Marván. Counsel in the Mexican action is Rios-Ferrer, Guillén-Llarena, Treviño y Rivera, S.C., a Mexico City law firm.