Lucio Tan rules out merger between PNB, Allied Bank

Lucio Tan has ruled out the possibility of a merger between Allied Banking Corp. and the Philippine National Bank, hinting that he was more inclined to sell rather than go through the tedious process of merging two banks.

In an interview with reporters, the usually elusive Tan said bank mergers were complicated, tedious and often expensive.

"I don’t want mergers, that’s a lot of work," Tan said when asked to comment on rumors that he was planning to merge his two banks to form a bigger financial institution that would lodge the Tan group firmly in the banking business.

"The thing to do is to buy and sell," Tan added, hinting for the first time that he might ultimately be planning to sell PNB as soon as the market turns around far enough to make the option profitable.

At present, Tan holds a 44.98 percent of PNB after signing a dacion en pago agreement with the Philippine Deposit Insurance Corp. (PDIC) which now also holds 44.98 percent of the bank.

The market has been rife with rumors that Tan was planning to work out the merger between PNB and Allied Bank especially after PNB has successfully resolved the payment of the P25-billion loan it got from the PDIC and the Bangko Sentral ng Pilipinas (BSP).

Until now, Tan has not given any indication of what he planned to do with PNB next. Before Tan made this latest pronouncement, it was assumed that only the government planned to sell its holdings in line with its standing policy to fully privatize PNB.

"Government is determined to privatize PNB, we are just waiting for the market to be good enough," said PDIC chairman Norberto Nazareno.

Under the MOA, Nazareno said both parties would have the right to match the offer price of any third party that might wish to buy the shares or portion of the share.

In his agreement, Tan had persuaded the government to convert part of the P25 billion loan into equity in the bank, effectively buying back some of the shares that it sold to Tan in 1999.

Tan, on the other hand, agreed to give the government irrevocable voting rights to the extent of the preferred shares that government would be receiving through the PDIC.

The irrevocable voting rights would give government a total of 44.98 percent voting interest in PNB, exactly equal to what was left to Tan at the end of the transaction.

Before the agreement, Tan held 67 percent of PNB while government had 16 percent.

PNB has so far settled P10 billion of its P25 billion loan in an agreement where PNB ceded, transferred and conveyed to PDIC all the existing collaterals covering the loan, in the form of mortgages covering twenty-two selected government accounts and assets amounting to P10 billion.