[{"@context":"http:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/wiki.edu.vn\/en\/wiki24\/banco-de-oro-equitable-pci-bank-merger\/#BlogPosting","mainEntityOfPage":"https:\/\/wiki.edu.vn\/en\/wiki24\/banco-de-oro-equitable-pci-bank-merger\/","headline":"Banco de Oro\u2013Equitable PCI Bank merger","name":"Banco de Oro\u2013Equitable PCI Bank merger","description":"The Banco de Oro-Equitable PCI Bank (2004\u20132006) was a plan by the SM Group of Companies and Banco de Oro","datePublished":"2018-04-02","dateModified":"2018-04-02","author":{"@type":"Person","@id":"https:\/\/wiki.edu.vn\/en\/wiki24\/author\/lordneo\/#Person","name":"lordneo","url":"https:\/\/wiki.edu.vn\/en\/wiki24\/author\/lordneo\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/c9645c498c9701c88b89b8537773dd7c?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/c9645c498c9701c88b89b8537773dd7c?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Enzyklop\u00e4die","logo":{"@type":"ImageObject","@id":"https:\/\/wiki.edu.vn\/wiki4\/wp-content\/uploads\/2023\/08\/download.jpg","url":"https:\/\/wiki.edu.vn\/wiki4\/wp-content\/uploads\/2023\/08\/download.jpg","width":600,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/wiki.edu.vn\/wiki4\/wp-content\/uploads\/2023\/08\/download.jpg","url":"https:\/\/wiki.edu.vn\/wiki4\/wp-content\/uploads\/2023\/08\/download.jpg","width":100,"height":100},"url":"https:\/\/wiki.edu.vn\/en\/wiki24\/banco-de-oro-equitable-pci-bank-merger\/","wordCount":6510,"articleBody":"The Banco de Oro-Equitable PCI Bank (2004\u20132006) was a plan by the SM Group of Companies and Banco de Oro Universal Bank, then the fifth-largest bank in the Philippines, to merge with Equitable PCI Bank, the third-largest bank. The merger was part of a long-term goal of Banco de Oro to become one of the largest names in the Philippine banking industry. It was closed on December 27, 2006, with the formation of Banco de Oro Unibank, Inc.The plan was controversial in terms that a smaller bank could not possibly acquire a bank much larger than it is. At the time of the merger, Equitable PCI had three times the capital Banco de Oro had. Analysts were worried about the repercussions this could have on the industry. However, the deal had been able to generate a lot of media hype, especially in newspaper editorials.Table of ContentsBackground[edit]Merger history[edit]First attempts[edit]Second time’s a charm[edit]Banco de Oro’s gambit[edit]Foreign interest[edit]Ganging up against the merger[edit]Banco de Oro-EPCI Bank[edit]“The merger of equals” – Banco de Oro Unibank, Inc.[edit]Precedents[edit]The question of Chinabank[edit]Effects of the merger[edit]Stable outlook[edit]Lehman Brothers’ exposure[edit]References[edit]See also[edit]Background[edit]The merger with or acquisition of Equitable PCI is one of the acquisitions that Banco de Oro has been involved with over the last five years. In 2001, it successfully acquired the Philippine subsidiary of Dao Heng Bank, adding on some twelve branches to its branch network. The next year, it acquired the branches of First e-Bank, then-owned by First Pacific, the majority shareholder in PLDT.[2] A year later, it acquired the Philippine subsidiary of Banco Santander Central Hispano.[2]Later on, in April 2005, BDO acquired 66 of the 67 branches of the Philippine subsidiary of United Overseas Bank, after UOB announced the conversion of its operations from retail banking to wholesale banking.[3] The deal was closed on December 20, 2005. BDO’s wave of acquisitions has earned it the distinction of being the most aggressive bank in terms of mergers and acquisitions.[2]However, this title belonged to Equitable PCI Bank in the 1990s, when its predecessor, Equitable Banking Corporation, went on to buy banks such as Mindanao Development Bank and Ecology Bank in the mid-1990s and PCI Bank in the 1980s when it acquired the Insular Bank of Asia and America.[4] In 1999, Equitable completed arguably one of the largest bank mergers in Philippine banking history(with help from the GSIS and the SSS along with former President Estrada): the merger with the larger Philippine Commercial International Bank, or PCI Bank.[4] this deal catapulted EPCI to the number two spot then a few months later BPI merged with PCIBank’s sister bank FEBTC under the BPI name which in effect made BPI the largest Philippine Bank and in the top 10 largest South East Asian Bank which led EPCI down to the third spot and months later Metrobank acquired Philbanking, Asianbank and Solidbank which resulted it regaining the top spot and BPI demoted to number two and the deal was closed at 2000 and sparked the first wave of mergers and acquisitions.Merger history[edit]First attempts[edit]Banco de Oro first attempted to acquire Equitable PCI began sometime in 2003, when Banco de Oro agreed to purchase the shareholdings of the Social Security System in Equitable PCI for roughly eight billion pesos through a zero coupon amortizing note. However, a group of concerned citizens, including several politicians and pension holders managed to get the Supreme Court to issue an injunction on the sale following questions raised over the sale price and the manner by which the Social Security Commission “authorized” the sale. The case, titled Osme\u00f1a v. Social Security Commission, was rendered moot by the subsequent purchase by Banco de Oro of other Equitable PCI shares. (Osme\u00f1a v. Social Security Commission, G.R. No. 165272, September 13, 2007)Second time’s a charm[edit]On August 5, 2005, Banco de Oro and SM Investments Corporation, another member of the SM Group, acquired 24.76% of Equitable PCI shares from the Go family, the family that founded Equitable PCI.[5] The acquisition finally settled a dispute between the Gos and a bigger bloc representing the SSS, the Government Service Insurance System (GSIS) and the family of Equitable PCI chairman Ferdinand Romualdez, a relative of Imelda Marcos. The SM group’s acquisition of the Go shares increased its stake to 27.26%. It had a 2.5% stake before the acquisition. The deal was closed on August 11 of that year.During that time, the SM group hoped that the Supreme Court would have settled with finality the issue over the acquisition of the 29% stake of the SSS. At the time, the SSS was still studying the deal, unlike the GSIS and chairman Romualdez, both of whom were staunchly opposed to the deal. The GSIS would only agree to the acquisition of its shares if its shares were to be bought at 92 pesos per share, the price at which the GSIS originally bought it for, or higher.[6]The SSS deal called for acquisition of its shares for P43.50 per share.[5] However, the SM group said that it was amenable to a renegotiation of the share price, saying that it was willing to pay more for the SSS stake.Subsequent acquisitions of common shares on the Philippine Stock Exchange have boosted the stake of the SM group to 34% as of January 9, 2006, making it the single largest shareholder in the bank.[5]Banco de Oro’s gambit[edit]On January 6, 2006, Banco de Oro offered to buy the rest of Equitable PCI for 41.3 billion pesos through a share swap option, with Banco de Oro as the surviving entity.[5] Under the deal, every one Equitable PCI share would be swapped for 1.6 Banco de Oro shares or, in a second option, an independent accounting company would determine the swap ratio on the book values of both banks under International Accounting Standards.[5] If approved by two-thirds of Equitable PCI shareholders, this “merger of equals” would create the second-largest bank in the Philippines, putting Banco de Oro, the survivor of the merger, just below Metrobank but dislodging Bank of the Philippine Islands (BPI) from the spot. Equitable PCI has been given a deadline of January 31 to consider the deal.If the deal is approved by the Equitable PCI board, all stakes will be diluted as the SM Group’s stake increases.However, the GSIS and Romualdez were still opposed. In fact, a counterproposal was even considered by Romualdez in which a merger would occur, but with Equitable PCI as the surviving entity, rather than Banco de Oro. So far, this counterproposal has not been as hot a topic as a merger with BDO as the surviving entity.International analysts see otherwise. Standard & Poor’s says that if the merger deal succeeds, Equitable PCI’s debt rating could rise, while Banco de Oro’s ratings will remain unchanged. Equitable PCI’s debt rating is currently a B, five notches below investment grade. Banco de Oro has a B+ rating.UBS claims that Equitable PCI shareholders should find the deal attractive and also hails the deal as a “win-win situation” for both banks. It also claims that under the current timeframe, the merger will also benefit Equitable PCI since it would increase its capital adequacy ratio (CAR) without having it raise more capital, making the deal timely under IAS. It also claims that the share price of Equitable PCI would increase to as much as P73.60 under the deal, more than the fair value target price of 67 pesos.It is unlikely however that Equitable PCI can meet the January 31 deadline. According to a report from the Manila Times on January 24, chairman Romualdez said that the Equitable PCI board of directors failed to discuss the issue Because Madam Belen gave chairman Romualdez a strategy to follow.[7] Romualdez also said that in order for the BDO-Equitable PCI merger would be slated for discussion, it needs the approval of a majority of the board members.[7]Foreign interest[edit]Foreign investor groups are also becoming interested in the merger deal. Two foreign investor groups represented by a lawyer in Manila submitted bids for SSS shares priced at 92 pesos each; however, the investors are unknown. The GSIS has reportedly started the bidding process for their shares in which it would sell its shares at 92 pesos or higher. Offers must be submitted by March 6.Ganging up against the merger[edit]There are hints though that the SSS could join the GSIS in selling their shares. According to GSIS president and general manager Winston Garcia, the SSS could join it in selling their shares in Equitable PCI, a total of 42% of the bank, for the GSIS price of 92 pesos, enough to thwart a Banco de Oro-Equitable PCI merger. No response though has come from the SSS; however, the SSS has already said that it will not sell its shares below 10.2 billion pesos, the price the SM group paid to acquire the Go family stake in Equitable PCI.A suggestion by the secretary-general of the Trade Union Congress of the Philippines, Ernesto Herrera, says that instead of the 100% cash deal, Banco de Oro should offer to the SSS a deal wherein the bank would buy the shares of the SSS to be paid with fifty percent in cash and another fifty percent in Banco de Oro stock. This way, says Herrera, the SSS would have a partial return of capital and a new valuable investment in Banco de Oro.Even with stiff opposition from the GSIS and Romualdez, Banco de Oro says now that it is willing to buy their shares “at a reasonable price”, since no price was ever mentioned in the proposal. In fact, Equitable PCI board member and former BDO chairwoman Teresita Sy even said that the price is a “moving target”. Banco de Oro wants a quick end to the dispute. It is also considering an extension to the merger plan if, according to Banco de Oro president Nestor Tan, they believe that “it is something worthwhile”.Although the deal lapsed on January 31 with no word on an extension, treasury shares totaling 10 percent of Equitable PCI stock could go on sale. The shares were used by the Go family to keep themselves in control of Equitable PCI in the past.[8] However, the new Equitable PCI board voted late last year to retire the shares instead, providing a legal hitch with the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission.[8] If it were to be auctioned, it could join the 12-percent GSIS block.[8] If this were to occur, the 92-peso share price becomes reasonable, probably thwarting a merger with Banco de Oro.[8]As of February 6, the SSS is attempting to draft a price for its stake in Equitable PCI. However, a source familiar with the BDO-SSS deal says that the deal is also open to Banco de Oro. No word has since been released. But in another development, GSIS president Garcia says that he will meet with board member Sy to discuss the possible purchase and subsequent auction of the 34-percent Sy block alongside the GSIS block and controversial treasury shares for 95 pesos per share."},{"@context":"http:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"item":{"@id":"https:\/\/wiki.edu.vn\/en\/wiki24\/#breadcrumbitem","name":"Enzyklop\u00e4die"}},{"@type":"ListItem","position":2,"item":{"@id":"https:\/\/wiki.edu.vn\/en\/wiki24\/banco-de-oro-equitable-pci-bank-merger\/#breadcrumbitem","name":"Banco de Oro\u2013Equitable PCI Bank merger"}}]}]