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Equitable PCI-BDO merger guaranteed(Business World (Philippines) Via Thomson Dialog NewsEdge) With barely two weeks to go before SM Investments Corp.'s tender offer for full control of Equitable PCI (EPCI) Bank ends, analysts are already seeing a successful bid of the Sy-led group to take over the country's third largest bank. The SM group may finally be able to merge EPCI with its own Banco de Oro Universal Bank (BDO), a plan that was shelved in May amid opposition from EPCI stockholders. Analysts said the SM group's launch of a P44.15-billion tender offer for EPCI shares at P92 apiece was a way of cutting corners to effect a merger. "The SM group launched the tender offer for EPCI with the end objective of merging EPCI and BDO," noted Jojo Gonzales, managing director of brokerage Philippine Equity Partners (PEP). "The offer price of P92 per share spread over a two-year period appears more acceptable to other EPCI shareholders and, hence, this attempt to take control of EPCI is more likely to succeed," he added. Philippine corporate laws state that a merger plan must first be approved by a majority vote of the board of directors of the constituent corporations, in this case, both boards of EPCI and BDO. The same plan must be submitted for approval by stockholders or members of each of the corporations at separate corporate meetings duly called for the purpose. The affirmative vote of stockholders, representing at least two-thirds of the outstanding capital stock of each bank, is needed for the merger to proceed. Analysts said mall magnate Henry Sy's bid to secure the two-thirds vote of stockholders should now come easy once investors bite the P44.15- billion tender offer. "Maybe that's [bid to get the two-thirds vote] the reason why BDO is trying to acquire more shares," Securities and Exchange Commission Fe B. Barin said in a chance interview. "SM Investments is already moving towards that direction [getting the two-thirds vote]," a market strategist said. The Sy group now holds more than 34% of EPCI. Last Aug. 31, EBC Investments, Inc., a subsidiary of EPCI, accepted the binding offer of Teresita T. Sy on behalf of the Sy family to buy its 10.78% stake in the bank. SM will then just have to muster some 20% more shares for it to reach the required two-thirds vote and effect a merger. Mr. Gonzales noted that state-run Government Service Insurance System (GSIS) and Social Security System (SSS), which have a 12.7% and 29% interest, respectively, could deliver the required shares. "The success of the tender offer squarely rests on the decision of the government pension funds... If they all agree, that totals more than the two-thirds needed to pass any resolution towards a merger," the analyst said. GSIS blocked SM's merger proposal earlier this year but the current offer price of P92 per share "vindicates the resistance of GSIS/SSS to previous offers at lower prices," Mr. Gonzales noted. "The current offer by SM puts forth a win-win solution for all parties," he added. SSS' case pending before the Supreme Court, meanwhile, should be overrun by the recent tender offer, Mr. Gonzales noted. The high court earlier issued a status quo order that stopped a planned Oct. 20, 2004 auction of the SSS shares after lawmakers alleged that the sale was disadvantageous to the government. At that time, Mr. Sy's offer price was P43.50 for each SSS share in the bank. Senator Sergio R. Osmena III, however, who is the primary complainant in the suit, has favored the P92 share price. Meanwhile, Trans Middle East (Philippines) Equities, Inc., which had opposed the merger, should not be a major hurdle. Mr. Gonzales noted that the Romualdez shares of 7.13% in the bank may be "small as to not affect the outcome." The tender offer will end on Sept. 28. The transaction is expected to be completed by Oct. 2. Payment for 30% of the total offer amount will be made in three tranches of 10% each on Oct.2, June 2, 2007, and Feb. 2, 2008. The remaining 70% will be paid on Oct. 2, 2008. A merger of EPCI and BDO will knock Bank of the Philippine Islands (BPI) off the no. 2 spot in terms of assets. Mr. Gonzales noted that the top three banks - Metropolitan Bank and Trust Co., the merged EPCI and BDO, and BPI - will account for 45% of industry assets. "This class of big banks will be very competitive in cost of funds and operating costs and may take further share away from second-tier banks," he pointed out. Copyright 2006 BusinessWorld (Philippines). Source: Financial Times Information Limited - Asia Intelligence Wire. |