DBS Phils paves way for merger with BPI

DBS Philippines Inc., a unit of Southeast Asia’s largest bank – DBS Group – has bought out its major shareholder to pave the way for its planned merger with Bank of the Philippine Islands, the country’s second largest bank.

A high-ranking official of DBS Philippines told Reuters yesterday the deal had been signed and was awaiting the final approval of the Securities and Exchange Commission (SEC) and the central bank.

"If the sale is approved by SEC, that agreement will be executed," the official said.

"There was an agreement but this was subject to all regulatory approvals. We also sought central bank’s approval much earlier for DBS’s plan to wholly own the bank."

Based on documents obtained from the SEC, ASB Holdings Inc. signed an agreement on June 21 to sell its 28-percent stake in DBS Philippines back to the bank for P734.22 million. DBS holds a 71.7-percent stake in the bank.

ASB Holdings is asking the SEC to give its formal approval and to mandate DBS to make the payment by the end of July.

Singapore’s DBS Group has been negotiating to buy the ASB Group’s stake to wholly own DBS Philippines and fold it into BPI.

DBS Group is a strategic foreign partner of BPI with a 20.66-percent stake in the bank.

Central bank governor Rafael Buenaventura earlier told Reuters the DBS Philippines-BPI merger would rationalize the DBS Group’s operations in the Philippines.

Joint venture paves the way

In April, BPI’s parent firm Ayala Corp. and DBS formed a 60-40 joint venture firm called Ayala DBS Holdings.

Ayala transferred 333.8 million shares or about 22 percent of BPI to the joint venture firm, making BPI the Ayala DBS Holding’s second largest stockholder after Ayala.

Some 11.7 percent of DBS Group’s 20.66- percent stake in BPI would be transferred to the joint venture firm.

Following the above transactions, Ayala said its direct stake in BPI would be reduced to 26 percent while the direct interest of DBS in BPI would drop to nine percent.

An analyst from a foreign brokerage house said the joint venture gave DBS more room to widen its ownership in BPI.

"This holding company would help DBS circumvent the foreign ownership limit on banks," the analyst said.

Under Philippine law, foreign investors cannot own more than 60 percent of a local bank.

The new General Banking Law enacted in June 2000, however, allows select foreign banks – including DBS Philippines – to increase their ownership in a local bank up to 100 percent subject to government approval.