Prolec: Mexico’s best worst deal ever

A giant acquisition of a Mexican company is a disaster of pure economic logic.

Mexican business is atwitter with the news that last week a General Electric (GE) spin-off, GE Veranova, bought out Prolec, a Mexican-controlled transformers manufacturer, for $5.275 billion dollars. The acquisition is likely Mexico’s largest ever liquidity event.

The amount was over 16 times Prolec’s yearly earnings. That GE Veranova was happy to part with the equivalent 70% of its entire 2024 income to buy half of a company should have been a warning signal onto itself.

It was only half the company because Prolec wasn’t 100% Mexican. The Massachusetts-based GE Veranova shared it 50-50 in a joint venture with Xignux, a Mexican electrical engineering company—but the latter had a controlling stake.

GE Veranova’s offer was meant to be one that the family-owned Xignux couldn’t refuse. And it was meant to be irrefusable because of how important it was for GE Veranova to get full control over Prolec.