Banco de Oro proposes merger with Equitable PCI

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Banco de Oro proposes merger with Equitable PCI
Posted: 1:44 AM Jan. 07, 2006
Doris C. Dumlao and Elizabeth L. Sanchez
Inquirer

MALL tycoon Henry Sy's Banco de Oro Universal Bank on Friday proposed to merge with Equitable PCI Bank, the country's third biggest bank in assets, of which Sy's SM group has become the single biggest stockholder.

The SM group owns 34 percent of Equitable PCI after accumulating shares from the open market and buying the shares last year of the Go family that had founded Equitable PCI.

The SM group has asked the Equitable PCI board to evaluate its offer until Jan. 31.

Banco de Oro disclosed to the Philippine Stock Exchange that it would like to swap up to 1.6 of its shares for every 1.0 share of Equitable PCI.

At Banco de Oro's closing price of P35.50 Friday, the offer price was about P56.80 for each Equitable PCI share, which closed at P63.00.

As a second option, Banco de Oro also offered to base the swap ratio on the book values of both banks to be assessed by an independent accounting firm using International Accounting Standards.

Banco de Oro needs consent of Equitable PCI shareholders representing 67 percent of Equitable PCI. These include state-run pension funds Social Security System (SSS) with 29 percent, the Government Service Insurance System (GSIS) with 14 percent, and the family of Equitable PCI chairman Ferdinand Martin Romualdez with eight percent.

"A bigger and stronger bank will ultimately be beneficial to the entire banking system and the banking public," Banco de Oro said.

It said this "merger of equals" that would create the country's second biggest bank with assets of about P500 billion.

Metropolitan Bank and Trust Co. would remain the industry leader with around P550 billion in assets.

A close second at present is the Ayala group's Bank of the Philippine Islands.

"In terms of market capitalization, the merged institution will move up to large-capitalization category, defined as companies with market capitalization of at least $700 million," Banco de Oro said in its disclosure statement.

At a press briefing Friday, Banco de Oro president Nestor Tan said stockholders of both banks would benefit from a merger through an improvement in earnings from synergies, a potential appreciation in the stock price with the increase in market capitalization and enhanced franchise value.

The merged entity would also yield cost savings and increased revenue, and an upgrade in credit standing, he said.

In particular, Tan said a merger would consolidate the strengths of Banco de Oro and Equitable PCI in consumer lending and result in a dominant player in middle-market lending and a market leader in money remittance volumes, branch banking, trust and corporate banking with the combined network of 685 branches.

In Banco de Oro's offer, Tan said, Equitable PCI shareholders would spend nothing to effect a merger.

Banco de Oro is the sixth biggest bank in assets with P212.3 billion and the eighth biggest in capital with P18.8 billion.

SSS president and Equitable PCI vice chairperson Corazon de la Paz said Equitable PCI management would hire a financial adviser to study Banco de Oro's offer.

When asked whether the SSS was supporting the merger plan, De la Paz said a decision would be made after the study was completed.

"If the study shows it's a good deal for us, then we'll go ahead if there's no other investment alternative," she said in an Inquirer interview.

"As directors, we have to evaluate what is good for the bank, to make it stronger," De la Paz said, noting that the SSS was no longer the single biggest stockholder in Equitable PCI.

Equitable PCI chairman Ferdinand Martin Romualdez, who was in the United States Friday, said in a separate interview that Banco de Oro's proposal would have to be thoroughly reviewed.

"This has to be discussed for the mutual benefit of all shareholders," he said.

Tan also said that a three-way merger with China Banking Corp., which is majority controlled by the SM group, was also possible but was "not being contemplated yet."

The SM group last year bought out the Go family's 180 million shares representing a 24.76-percent stake in Equitable PCI for P56.50 per share.

The group has an offer to acquire the 29 percent held by the SSS, but this subject of a pending court case filed by a group of SSS members opposed to the sale.

The SM group's offer to the SSS is P43.50 a share, or a total of P8 billion. The group has said it is willing to improve its offer if the court would uphold a deal it had made with the SSS in late 2004. With INQ7.net

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