Banco de Oro to take over Equitable PCI

Banco de Oro Universal Bank, a unit of SM Investments Inc., said Monday it will pursue a merger with Equitable PCI Bank, Inc., a transaction that will create the country's second-largest lender by assets, with a market capitalization of about $2 billion. The combined entity will be named Banco de Oro-EPCI Inc. Henry Sy Sr., patriarch of the Sy family who controls Banco de Oro and who is also regarded as the Philippines' retail tycoon, told reporters the merger "was a dream come true." Asked if he intended the merged bank to eventually be the country's largest lender, the 82-year tycoon said he preferred his bank "to be the stronger and more profitable bank." "The merger of Banco de Oro and Equitable will bring together the bank's organization strengths," said Teresita Sy-Coson, Henry's daughter who sits as Equitable's vice-chairman. Analysts were optimistic on the merger plan, given the Sy group's other interests in mall development and real estate, which should create synergies with the merged bank. SM Investments Inc., which is the parent firm of Banco De Oro, also controls mall developer SM Prime Holdings Inc. and leisure development firm Highlands Prime. "The merger will create a powerhouse institution with a major presence in business lines such as retail banking, asset management, foreign exchange remittances, credit cards, and underwriting. The two will have the backing of the SM empire and its affiliated companies, including San Miguel Corp," said ATR Kim Eng analyst Ed Bancod. Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco said the merger hastens the consolidation of the local banking industry which is still currently over-banked. Top 2 Bank The merger of the two banks will create the second largest bank in terms of assets, next to number one Metropolitan Bank and Trust Co. (Metrobank) which had total resources worth P629.6 billion as of end-September. Equitable's and Banco de Oro's combined assets totalled P614.8 billion as of September 30. Equitable's consolidated total assets stood at P324.4 billion as of end-September while Banco de Oro's total resources were at P290.4 billion. Their merged entity would dislodge from the second spot Bank of the Philippine Islands (BPI), which had P525.96 billion in assets as of September 30. Banco de Oro-EPCI, which will have a network of 698 branches and 1,171 automated teller machines nationwide, will also rank as the second largest bank by deposits with a combined P435 billion. "All told, these institutions generate more than 5 percent of the Philippines' GDP. Equitable, once combined with BDO, can be expected to fully lever up on such relationships to reel in new deposits, loans and other collateral businesses not just from the SM group, but also its tenants, customers, suppliers and affiliates," said Bancod. Coson, however, ruled out a merger of the Banco de Oro-EPCI with China Banking Corp., another bank controlled by her family. "China Bank is out of the equation," she said. Stronger bank The merger will executed via shares swap. Under the proposed terms, Equitable shareholders will receive 1.8 Banco de Oro shares for every Equitable share. Banco de Oro president Nestor Tan expressed confidence the merger will prosper despite a legal setback which prevented state pension fund Social Security System (SSS) from selling its 25.8 percent stake in Equitable to SM Investments. SM Investments ran a tender offer to Equitable shareholders from August 31 to September 29, in its bid to raise its stake in the bank from 34 percent to 67 percent -- a level which will enable the group to strike a merger between Equitable and Banco de Oro. At the end of the tender offer, Guidote said SM generated 51.6 percent of Equitable's total shares, bringing its stake in the bank to 85.6 percent from 34 percent. SM said it bought a total of P34.49 billion worth of Equitable shares in the tender offer at P92 per share. The shares will be paid over a period of two years. SSS has agreed to sell its stake but has to wait for an opinion by the Supreme Court on how it can sell its shares. Discounting the shares held by SSS pending approval from the High Court, SM currently has a 59.8 percent stake in Equitable. Aside from SSS, other shareholder groups that participated in the tender offer included Government Service and Insurance System (GSIS) which disposed its 13.55 percent stake; and EBC Investments Inc. which sold its 10.8 percent interest. "That issue (SSS) won't get in the way of the merger. We hope to get enough support and votes from minority shareholders at a special meeting on December 27, to help us raise our stake to 67 percent," Tan said. - GMANews.TV