MANILA — Micronesia Mall owner Lucio C. Tan Sr. and Agana Shopping Mall owner Henry Sy Sr. have ended up winners in the latest round of acquisitions of major banks in the Philippines.
On Aug. 18 Tan was able to increase his stake in Philippine National Bank to 77% by offering some 17 billion pesos ($303 million) for the Philippine government’s 67% stake. This matched the offer of rival Union Bank of 43.77 pesos (78¢) per share. Union Bank the lone challenger in the bidding on Aug. 17 is owned by the Aboitiz a Basque family based in the Cebu province with roots in shipbuilding.
Sy meanwhile gained a foothold in Equitable-PCIBank the third largest lender in the Philippines. Using his universal bank Banco de Oro Sy last Aug. 5 acquired a 24.7 percent stake in EPCIB from its owners the Go family ending the latter’s over 50 years in banking. The deal is valued at about 10.2 billion pesos ($179 million) or at 56.50 pesos a share according to BDO president Nestor Tan.
Banking officials said the latest acquisitions would spark another round of consolidation in the Philippine banking industry.
In a press briefing on Aug. 26 Domingo Chua PNB director and spokesman for the Lucio Tan group of companies virtually confirmed the merger of the bank with another Tan financial institution Allied Bank.
“A merger between PNB and Allied Bank seems to be quite logical ” Chua told reporters. “It is not that easy (but) we will come to that. Mr. Tan always says we need a strong bank ” he added.
PNB is still under a five-year rehabilitation program that will end in 2007. Allied Bank is the Philippines’ eighth largest lender. It is still not clear what effect the merger will have on the separate branches of PNB and Allied Bank on Guam. But PNB sources say any move will be “in consonance with Guam banking regulations.” PNB also has a branch on Saipan. PNB and Allied Bank offer remittance services to Filipinos living and working on those islands.
Tan who made his fortune in tobacco and beer also owns flag carrier Philippine Airlines and Century Park Hotel in Manila and several other businesses in other fields. He was named ambassador-at-large by the government of Guam in 2002 for his valuable contributions to business and donations in the aftermath of Typhoon Chataan which devastated the island. Nov. 4 2002 was declared Lucio Tan Day. On Guam he owns Allied Pacific Development Group Inc. which does business through subsidiaries as Micronesia Mall American bakery and Toppy Furniture. He also owns I-Connect which is managed by his daughter Gigi. On Lucio Tan Day Gov. Carl T.C. Gutierrez was quoted as saying that Tan “is richer than the government of Guam.”
Sy meanwhile is an active albeit silent player in Guam and Saipan businesses owning the Agana Shopping Center and a stake in Aquarius Beach Tower in Susupe Saipan. Sources said that his plan to bring his retail flagship ShoeMart to Guam (See “It’s ShoeMart; Retail giant anchors Agana Shopping Center” in the Oct. 18 2004 issue of the Journal.) but no date has been given.
According to the London-based credit rating agency Fitch Ratings a merger between PNB and Allied Bank would make the merged institution the third largest in the Philippines in terms of assets.
Similarly a possible three-way merger between BDO Equitable PCI and China Bank where Sy also is now majority owner is also expected says a rival bank’s official who requested anonymity. He said the surviving entity will make it the largest bank in terms of assets dislodging current industry giant Metropolitan Bank and Trust Co. which also has a branch on Guam.
These mergers will come on the heels of the recent takeover by Bank of the Philippine Islands owned by the Spanish-Filipino Zobel de Ayala family of the Santos family’s Prudential Bank in a deal valued at 6.13 billion pesos ($109.27 million).
In an interview with the Journal Philippine central bank Gov. Amando Tetangco Jr. sees more consolidation in the local banking industry. “These are positive developments in the banking system. We’d like to see fewer but stronger banks. This is expected to lead to economies of scale increased efficiency and greater confidence in the banking system. In the end it will benefit both banking institutions and the public at large.”
The PNB purchase by Tan was completed on Aug. 26 with three block sales of bank shares changing hands at the stock exchange. According to Christy Orbeta executive vice president of the Philippine Deposit Insurance Corp. which oversees the PNB rehab the Philippine government is required by law to sell 3% of its remaining stake in the bank at the same price it sold the shares to Tan. This will leave the government a 10% interest in PNB.
PNB posted a net income of 315 million pesos ($5.6 million) in the first six months of the year on the back of robust growth in interest income and fee-based gains. The bank earned 40 million pesos ($713 012) in the same period last year. The bank is targeting a profit of 604 million pesos ($10.8 million) for 2005.
Separately in a statement to the Philippine Stock Exchange on Aug. 5 Banco de Oro said: “The acquisition will make BDO a major shareholder in Equitable PCI and is consistent with its long-term goal of becoming a major player in the Philippine banking industry.”
BDO said it would also purchase the Go family’s 10% stake in Equitable Card Network EPCIB’s creditcard company and the main issuer of Visa credit cards in the Philippines. This acquisition will be made in tandem with Sy’s SM Group the mall and retail group of the tycoon.
In a press briefing of Sy’s SM Investment Corp. on July 14 BDO president Nestor Tan said: “We are looking at a merger for the long term. This will create a good bank; the size is only a byproduct.”
The agreement between the Gos and Sy ended a year of controversial moves taken by the family to thwart the tycoon’s takeover attempt.
The Go group despite its small stake had been claiming majority control of the bank through a complicated use of treasury shares as proxies. The pension funds — the Social Security System Government Service Insurance System — in alliance with the Romualdez family’s Trans Middle-East Philippine Equities Inc. also claimed majority share of 54.6% and alleged that the Gos only owned 35%. The tussle led to two separate board of directors being elected during the bank’s stockholders meeting last July 19.
The Supreme Court on Aug 4 issued a temporary restraining order against the Gos instead allowing state-owned pension funds to take control over the bank. The Sy group will get four seats on the bank’s board.
Newly elected EPCIB chairman Ferdinand Martin Romualdez said however it may be too early to talk about a merger with BDO. “It’s premature because you have to get at least 67% of the bank to effect a merger ” he said. Most likely he said the Sy group will slowly raise his group’s stake in the EPCIB to become majority shareholder the same way it did before it took over China Bank.
The Philippines has 42 commercial and universal banks 86 thrift banks and 764 rural banks nationwide. MBJ