Gov't defers sale of PNB

Government has decided to postpone the privatization of Philippine National Bank (PNB) for one month, or from the original schedule of May 26 to June 26, to give interested buyers more time to conduct a due diligence on the bank and await the signing into law of the General Banking Act (GBA), Finance Secretary Jose T. Pardo announced yesterday.

Government has asked the International Monetary Fund (IMF) to agree to an extension while taipan Lucio Tan, which holds 30 percent of PNB, will also be asked to agree to an extension.

The IMF, Pardo said, has agreed to the postponement to ensure a transparent and successful sale of the former government bank.

The revised GBA must be in effect before the sale is conducted so the prospective foreign bidders could qualify for 100-percent foreign ownership. Under existing laws, foreign ownership of a local bank is allowed only to a maximum of 60 percent if the foreign entity incorporates locally or just up to 40 percent if it is a purchase of equity.

Pardo said the schedule for prequalification and payment for any bidding fees will also be moved accordingly.

He said at least one local bank had paid the fee to the government but several other interested bidders have expressed interest in PNB.

To date, there are two local banks interested in bidding for PNB plus two US-based entities, one of which is a bank and the other is a financial services firm.

Meanwhile, the SEC is exempting the PNB from its tender offer rules which require investors buying more than 51 percent of a listed company to offer shares to minority shareholders.

The Commission en banc said it approved PNB's exemption from the tender offer rules to be consistent with its previous positions in the case of earlier bank buyouts and mergers such as the acquisition of 72 percent of Philippine Commercial International Bank (PCI Bank) by Equitable Bank, the merger of Bank of the Philippine Islands and Far East Bank and Trust Co. and more recently, Metropolitan Bank and Trust Co.'s acquisition of Solidbank Corp.

With the approval, the winning bidder for PNB will not be required to undertake a post acquisition tender offer to minority shareholders.

Finance Undersecretary Cornelio Gison asked SEC chairman Lilia Bautista through the money market operations of the regulator, that the tender offer rules should not apply to the sale by PNB and tycoon Lucio Tan of their respective buyers.

The SEC's approval on the exemption from tender offer rules is required, especially since the SEC has yet to come up with revisions of the existing tender offer rules that would ensure fair play for parties interested in acquiring shares of a company.

The proposed improvements to the tender offer rules among others set a threshold of 10 percent or more above market price. The SEC added it will include a definition of market price since this term could be variously interpreted as closing price, high or low for the day or an average.

The SEC also proposed that existing loopholes be plugged in order to prevent investors from skirting tender offer rules. Currently, an investor can avoid making a tender offer, by limiting his purchases to less than 10 percent at a time or limit the premium to less than 10 percent above market price.

Through several acquisitions at a premium or less than 10 percent above market, controlling interest can be acquired without having to make a tender offer. Also, by acquiring less than 10 percent at a time, a person can effectively increase his control by more than 10 percent without making mandatory tender offer. -