Banco de Oro needs P11billion to gain control of Equitable PCI

Banco de Oro Universal Bank, the banking unit of retail tycoon Henry Sy, would need around P11 billion to acquire the combined shareholdings of state pension fund Social Security System (SSS) and EBC Investments Inc. in Equitable PCIBank, currently the country’s third largest lender.

BDO president Nestor Tan said the bank remains interested in Equitable PCIBank as it positions itself to be among the top three banks in the country.

BDO, the seventh biggest bank, intends to acquire EBC Investments Inc.’s 10.8 percent stake in parent company Equitable PCIBank for cash.

Tan said its earlier proposal to acquire the 25.8 percent stake of SSS in Equitable PCIBank was still standing.

Even as SSS and BDO reached an agreement on the planned sale, the deal had met stiff opposition from various groups, specially lawmakers which claimed SSS could get a better price than the one offered by the Sy-owned bank.

The controversy forced the pension fund to put its 25.8 percent stake in Equitable PCI up for auction.

But BDO has been given the right to match the winning bid if it is higher than its offer.

The Supreme Court, however, had issued an order stopping the sale of Equitable PCI shares through a Swiss challenge and directed the parties to observe the status quo prevailing before SSS decision.

Tan said that should it be successful in acquiring a strategic stake in Equitable PCI, BDO would be eventually merged with the latter to catapult the merged institution to the number two slot in terms of assets after Metropolitan Bank & Trust Co.

"It doesn’t make sense to keep the banks separate. It makes sense to merge the two. Our goal is to become number 2 or number 3, but we will not lose sleep over it," Tan said.

Tan said BDO will need the support of two-thirds of Equitable PCI’s shareholders to merge the two banks.

Equitable-PCI’s founding Go family has a 24 percent stake while the Government Service Insurance System (GSIS) owns about 12 percent. Another significant shareholder is the Romualdez family. The bank has a public float of around 25 percent.

Sources said the Gokongwei group remains interested in reacquiring his stake in the bank at a lower price.

Analysts said the union, once consummated, will further strengthen the banking system some of whose bigger players are still suffering from the combined effects of the government mismanagement and the 1997 Asian financial crisis.

Even on its own, Equitable PCI would gain from an association with BDO, since Sy, its controlling shareholder, also owns the biggest shopping mall operator.

BDO has been on an acquisition binge since its merger with Dao Heng Bank in 2001.

In 2002, BDO acquired First E-Bank, then owned by Metro Pacific Corp. Sixty branches were added, bringing BDO’s total current network to 179 branches.

Before that, most of BDO’s branches were concentrated in Metro Manila, so First E-Bank branches gave them a good foothold in the provincial markets.

A year after, BDO purchased Banco Santander Philippines Inc. and its brokerage arm, Santander Investments Securities. The latter allowed them to reach the more affluent and high-networth clients who require banking services and investment products more sophisticated than the mainstream branch products and services.

Just recently, BDO acquired all but one of the 67 Philippine branches of Singapore’s United Overseas Bank for P600 million. The acquisition of UOB branches is expected to be completed by October this year, Tan said.

The proposed deal is subject to the approval of the Bangko Sentral ng Pilipinas, the Philippine Stock Exchange, the Philippine Deposit Insurance Corp. and the Monetary Authority of Singapore.

The proposed transaction is in line with BDO’s long-term expansion plans and UOB’s ongoing efforts to rationalize its business operations so as to achieve cost-efficiencies and build a business platform that is consistent with the business prospects in the country.

UOB is planning to apply for conversion to a thrift bank to better reflect its increasing focus on wholesale banking and fee-based income.