SM sells $100-M BDO depositary shares

SM Investments Corp., the holding company for Henry Sy’s retailing and banking concerns, raised $100- million selling depositary receipts backed by shares in its banking unit BDO (BDO).

The issue is believed to be the first fully-marketed global depositary receipt (GDR) offering from the Philippines since the Asian financial crisis in 1997.

The depositary shares were priced at the equivalent of P33.50 per BDO share, a discount to the stock’s 30-day moving price, said Stephen CuUnjieng, managing director of Macquarie Bank Ltd., which arranged the transaction. Demand was more than twice the securities available, he said.

"I am very pleased with the strong reception the issue received from the international investor community. It is a validation of investors’ confidence in BDO’s strategy," said BDO president Nestor V. Tan.

The sale comes two weeks after BDO made a P41.3-billion takeover offer for Equitable PCI Bank, the third largest Philippine lender bwup additional funds for acquisitions and investments," said Astro del Castillo, managing director at First Grade Holdings Inc., a financial management and advisory company. "They now have more leverage to pursue Equitable PCI or whatever are targets on their radar screen."

The bank may eventually need to sell shares overseas as part of its growth strategy, Tan said.

A successful acquisition of Equitable by BDO would create a rival to the country’s top two lenders, Metropolitan Bank and Trust Co. and Bank of the Philippine Islands.

BDO’s depositary share sale is the fourth transaction arranged by Macquarie Bank Ltd. for the SM Group, which has businesses including the country’s largest Philippine shopping mall operator. Macquarie Bank last year advised the group when it combined Sy’s supermarket and hypermarket chains into SM Investments.

The depositary receipts are backed by BDO shares owned by an SM unit, Primebridge Holdings Inc. Owners of depositary receipts are entitled to dividends and capital gains of the underlying BDO shares.

SM Investments chief finance officer Jose Sio said the depositary shares sold are equivalent to 19 percent of BDO. Primebridge owns 22 percent of the bank, he said.

The sale proceeds raise SM Investment’s cash to about $300 million, which will be used for the company’s investments including additional shares in Equitable PCI, he said.

BDO offered to merge with Equitable PCI through a P41.9 billion share swap. Both BDO and SM Investments own shares in Equitable PCI.

BDO Universal Bank’s $100 million Global Depositary Receipt (GDR) issue was strongly oversubscribed by foreign institutional subscribers, making it the first equity deal for the Philippine capital markets in 2006.

BDO, the country‚s seventh largest bank in assets, said institutional investors based in the United States, Europe and Asia bought the GDRs.

With the strong oversubscription, the issue could have been priced without a discount but the seller agreed to price the placing at a slight discount to the weighted average price of BDO shares over the last 30 days as a goodwill gesture to its investors.

Macquarie Bank Ltd. was the Lead Manager and Sole Bookrunner for the equity placement.

The GDRs will be listed and traded on the London Stock Exchange.

BDO is eyeing a 20-to-25 percent growth in its 2005 net income from the P2 billion profit it posted last year as it beefs up its core businesses and realizes gains from recent acquisitions. Net earnings are expected to reach between P2.4 billion to P2.5 billion.

BDO, the banking unit of retail tycoon Henry Sy, recently acquired the local branches of Singapore’s United Overseas Bank Ltd. for P600 million. — Zinnia dela Peña