Another one who can’t let go

The controversy surrounding Equitable PCIBank, the Go family, and other stockholders of the bank has now become the favorite subject of coffee shop talk in business circles. Forget the GMA resign campaign that has polarized Philippine business. The Equitable PCIBank’s scheduled stockholders meeting on July 19 promises fireworks galore.

At the center of the controversy is the group of Antonio L. Go and the 10 percent stake in the bank owned by subsidiary EBC Investments Inc. (EBCII). This 10 percent interest is widely understood to be treasury shares, which are shares reacquired by the corporation that issued it for a legitimate corporate purpose. These shares are owned by the bank but held by subsidiary EBCII.

While there is no dispute that treasury shares have no voting rights precisely to prevent the use of these shares to perpetuate management or the board in power, the Go group has voted these shares in the past to gain control of the board despite being a minority. And by the looks of it, they would do so again next week.

This is one of the unusual dimensions of the Equitable PCIBank controversy: that the minority group has been able to control the bank using a bloc of shares that, under corporate laws, do not have the right to vote or be voted upon. And this is the core issue of this raging controversy. Without these treasury shares, the Go group would be entitled to only four board seats. The GFIs – the Government Service Insurance System (GSIS) and the Social Security System (SSS) – have a combined stake of 39 percent, enough to give them at least seven board seats.

The treasury shares tilt the balance of power in the bank, and with the 10 percent stake represented by the treasury shares, which are equivalent to one board seat, the Go group gains an additional seat at the expense of the GFIs which are the biggest stockholders of the bank.

It wasn‚t too long ago that the smaller Equitable Bank gained headlines by when it acquired the bigger PCIBank in a much-celebrated merger. At that time, Equitable Bank chairman George Go discovered some worrisome details about PCIBank. He discovered for instance that PCIBank’s non-performing loans were considerably high. To beat other bidders then, the Equitable-led consortium had offered to waive a due diligence study of PCIBank‚s finances.

But Go was unfazed then. He vowed to make the merged bank number one in three years, based largely on the expanded network that Equitable PCIBank would have after the merger. It would have 476 branches as against the 388 branches of Metrobank, which was the biggest bank in the country in 1999.

Of course everything changed after EDSA II, especially after Go figured in the controversy surrounding the infamous Jose Velarde bank account. Up to the time of the merger, PCIBank was trading at P255 per share while Equitable was at P85. Today, Equitable PCIBank shares are trading at P42-P43 per share.

George Go is no longer part of the equation. It is the Antonio Go group that now lords it over at Equitable PCI. In what can only be described as ingenious and shrewd maneuverings, the group was able to perpetuate itself in power over the last five years using the treasury shares as tool to control the bank.

What the Go group should have done as early as three years ago is to sell the treasury shares as mandated by the Bangko Sentral ng Pilipinas (BSP). In the first place, the BSP had authorized EBCII to acquire the treasury shares bank in 1999 on the condition that these shares would be sold within two years or by 2001 at the latest. Equitable PCI did not do so and the Go-dominated group merely stated in its financial statements hat the treasury shares are retained for a strategic acquisition. What that strategic acquisition is, nobody knows except Go and his allies.

And if Go’s group thinks that it can postpone the inevitable by postponing the scheduled stockholders’ meeting, then it better think twice. Both SSS and GSIS have objected to any attempt to postpone the July 19 meeting, as the head of both GFIs have already served notice on the Equitable PCI board that they were exercising their right, as holders of a combined more than one-third of the issued capital stock, to call a special meeting of the stockholders for any purpose at any time. SSS owns 39 percent and GSIS, l2.7 percent of the bank.

SSS and GSIS have already expressed their intention to seek at least seven of the 15 board seats. A powerful bloc indeed.

The North’s savior

The rainy season is in, summer is officially over. By this time, most of the country’s hotels and resorts would have posted some very impressive numbers.

Traffic was reportedly brisk, according to many tour and transport operators. At least during these hard times, the leisure sector managed to turn in a profit.

And this is where infrastructure development becomes truly manifest as indispensable to economic growth. A classic example would be the Manila North Expressway, which links Metro Manila to the central and northern Luzon hubs. Renovated and upgraded by the Manila North Tollway Corporation (MNTC), the North Expressway has eased traffic going north and made Central and Northern Luzon more accessible again.

Take Subic and Clark, former US military facilities-turned-commercial and leisure zones, for instance. Or more aptly, take the ride going to Subic and Clark. The rehabilitated North Expressway has cut travel time by a good 30 minutes to one hour. What this translates to is easier access, substantial savings on fuel, and, more importantly, more convenience and peace of mind which is the "X-factor" in any leisure-based traveling. Experts foresee that in the next two to three years, after the idea of better access and increased traffic would have been more or less validated, Central Luzon will be Philippine tourism’s boomtown.

Further north are La Union and Pangasinan, both resort stops, and the summer capital of the Philippines, Baguio City. They too are beneficiaries of the rehabilitated North Expressway because access to these destinations has been eased, making it more likely for travelers to choose these places to visit. Of course some of the roads from Tarlac onwards are in need of some repair and rehabilitation, and the government would do well to take the North Expressway’s lessons to heart if indeed it wants to fully develop the Northern Luzon growth corridors. From a tourist’s point of view, Northern Luzon is largely an untapped jewel waiting to be polished and experienced.

It would really be interesting to see just how much of an impact the rehabilitated North Expressway has made thus far.

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