(Recasts throughout; adds investor presentation, quotes)
By Christine Murray and Sheky Espejo
MEXICO CITY, Oct 26 (Reuters) - Shares in Mexican bank Grupo Financiero Banorte recovered slightly on Thursday as the company revealed more details about a merger deal with a smaller bank announced the previous day that sent the stock sliding more than 9 percent.
Banorte shares closed up 1.28 percent as the bank published more financial information about the deal, which would create Mexico's second-largest financial group. But they remain below the level they were at before it was announced.
The plan to join the two firms hit the far less liquid Interacciones shares even harder. They closed down more than 17 percent on Thursday after little movement the day the deal was announced.
The chairman of the smaller bank is the father of Banorte's chairman.
In an investor presentation seen by Reuters, Banorte , the largest Mexican-controlled bank in Latin America's second biggest economy, valued the deal at 26.557 billion pesos ($1.39 billion), half in cash, half in shares.
Interacciones focuses on lending to state governments for infrastructure, which some analysts saw as a risk months before 2018 elections that could bring wholesale political change.
"Banorte shareholders are probably fearful the company is overpaying," said a Monterrey-based portfolio manager from brokerage Monex, speaking on condition of anonymity.
"Also, the fact that (Interacciones') government exposure is high, and is not in line with that of Banorte."
Interacciones Chief Executive Carlos Rojo rejected that argument in an interview, pointing to his bank's default rate, which is the lowest in the sector.
Rojo attributed the fall in the share price to uncertainty about when the promised cash payment would come. Although rumors had been around for years about a potential deal, he said the two had only been discussing it for the past few weeks.
The two companies embark this week on a roadshow to convince investors, particularly international ones, and the respective shareholder votes are due to take place in December.
The chairmen of both banks belong to the Hank family, which has roots in the State of Mexico, home of President Enrique Pena Nieto. The Hank family is widely known to have long-running ties to the ruling Institutional Revolutionary Party (PRI).
Interacciones shareholders were asking why the deal valued the smaller bank well below its market capitalization of just a few weeks ago, the Monex fund manager said.
In the Banorte presentation, the bank said the deal valued Interacciones shares at the equivalent of 98.4 pesos and that the purchase could increase return on equity (ROE) by as much as 10.5 percent in 2019.
Interacciones shares opened on Wednesday at 107.33 pesos per share before the deal was announced, and closed on Thursday at 86.4 pesos.
Banorte did not respond to a request for comment. (Editing by Christian Plumb and David Gregorio)