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BPI, PNB and Allied Merger



The directors of three of the country's iconic banks voted on Wednesday to push ahead with a proposed three-way merger or "share-swap transaction" likely to make the Ayala-owned Bank of the Philippine Islands (BPI) the largest lender by assets.

In a telephone interview, an official said businessman and Philippine National Bank majority owner Lucio Tan obtained board approval to proceed with the share-swap proposal that would allow him to own 20 percent of BPI.

Tan has obtained earlier regulatory approvals to have PNB fused with the lender Allied Banking Corp. that the businessman also owns. In dollar terms, the combined assets of the three-way merger of BPI, PNB and Allied Bank would sum up to $33 billion.

Should the deal push through, Lucio Tan would become BPI's second-largest shareholder after the Ayala Group, whose equity shares were seen to equal 33 percent of total outstanding shares.

According to the official, the share swap would result in BPI acquiring PNB shares for P95 or P96 a share that analysts also estimated as 1.8 times the latter’s book value.

Analysts said PNB book value per share at present is P56 a share. While some analysts view the proposed share-swap deal as rather curious, one official pointed out it was not as if Tan has not teamed with the Ayalas in a business venture ever.

According to the official, the Ayalas of BPI and Tan of PNB joined forces some two years ago to co-develop a 3-hectare property along Edsa in Mandaluyong City. The co-development is formally known as the Avida Towers Centera, in which the Ayalas have begun building what would eventually become a four-tower residential and commercial space with Tan contributing the real estate.

PNB acquired the property from its previous owner, Rodolfo Cuenca of the now-defunct Construction and Development Corp. of the Philippines or CDCP, when the lender had to foreclose as Cuenca defaulted on his commitments all those many years ago. Some have speculated a share swap of 1.7 times book value would allow Tan to earn P26 billion. It was learned the transaction, should it push through and have all the regulatory approvals, would make BPI the largest lender in the country with assets collectively worth P1.201 trillion.

Banco de Oro Universal Bank, lead lender by assets collectively worth P1.150 trillion, holds the distinction at present. Data show BPI assets of P720.663 billion, PNB with assets of another P304.317 billion and Allied Bank with P176.697 billion.

When sought on how the regulators view the transaction, BSP Deputy Governor Nestor A. Espenilla Jr. said it was still "too early to comment." But the BSP encourages further consolidation among local lenders as part of the preparations for eventual financial system integration among countries comprising the Association of Southeast Asian Nations seen happening by 2020.

The country's largest lenders compare poorly against the giants in the region, which include Japan’s Mitsubishi UFJ Financial Group with assets worth $2.64 trillion as at end-March this year. The British-owned HSBC Holdings has assets of $2.63 trillion while Beijing's Industrial and Commercial Bank of China has assets of $2.60 trillion.

Source: Everyting in Budget


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