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Mexico government open to buying Citigroup's Banamex

Citibanamex bank branch in Mexico City

MEXICO CITY (Reuters) - Mexican President Andres Manuel Lopez Obrador's administration is studying the possibility of buying a majority of shares in Citigroup's local retail unit known as Banamex, according to a government statement published on Tuesday.

Buying it would be "good business," Lopez Obrador said in a press conference earlier, when asked about rumors that one of the bidders, Grupo Mexico's owner German Larrea, was dropping out of the process amid a dispute with the government.

Lopez Obrador said he thought about the possibility of creating a public-private association with U.S.-based Citigroup to operate the bank after hearing about Larrea's alleged withdrawal.

Citigroup declined to comment on the matter.

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Speculation that Larrea might bow out spread on Monday after a Mexican columnist tweeted he was dropping the bid, citing concerns over the government's power to take it over.

Grupo Mexico told Reuters on Tuesday that a quote in a tweet seemingly from Larrea was false and that it could not comment on the process with Banamex.

Mexican authorities and Grupo Mexico are currently negotiating a way out of a government decree establishing the temporary takeover of part of a railway in Southern Mexico operated by a unit of the company - a move widely seen as an expropriation.

Lopez Obrador said the government wants to take away Grupo Mexico's concession as it considers the railway to be part of a key infrastructure project.

Calling the move "surprising," the firm's transport unit Grupo Mexico Transportes, said it was weighing its options, following what it called the Mexican Navy's temporary occupation of its facilities last Friday morning.

Lopez Obrador said he is willing to reach an agreement with Grupo Mexico over the railway during the press conference.

The president said on Monday that Grupo Mexico has proposed a government payment of more than $534 million for the railway. Grupo Mexico would not confirm the figure.

Earlier in May, the president said the government has no problem with Grupo Mexico buying Citigroup's unit.

(Reporting by Mexico City Newsroom; Additional reporting by Tatiana Bautzer in New York; Editing by Bill Berkrot)