EPCIB, even after declaring a good performance during the first three quarters of 2005, continues to be hobbled by the Jose Velarde controversy. At that time, more than six years ago, EPCIB was selling at P96.76 per share; it is now undervalued at P63.
In its released third quarter report last year, EPCIB declared a revenue growth of almost 20 percent, not bad if compared to the banking sectors 21-percent growth average. Net income, in fact, was 40 percent higher.
Millions of Filipinos who have a stake in EPCIB through their membership in the Social Security System (SSS) and the Government Social Insurance System (GSIS) have to watch out how this merger proposal turns out. SSS, after all, owns about 29 percent of EPCIB, while GSIS has around 12.4 percent, or a combined powerful 42 percent.
Both pension funds have been shrouded with speculations of bankruptcy, the fouled EPCIB acquisition and governments continued meddling in their funds being a couple of reasons for the rumored financial stress.
Both pension funds had bought their EPCIB shares at an average price of P92 during the Estrada administration, only to wake up one morning to realize that their combined investment of P16 billion had been whittled down to roughly P9.2 billion in the aftermath of the Jose Velarde investigations.
This is all not sitting well with GSISs Winston Garcia who has strongly come up with statements that short of condemns the BDO proposal. If you really think about it, GSIS is playing this game smartly. With its stake a little more than an eighth of EPCIB, the governments pension fund does not really have a big say especially if SSS will eventually agree to the BDO proposal.
SSS clearly holds the key to the merger given its bigger stake in the bank. But its president, Cora dela Paz, manages to keep her cards close to her chest and has remained mum since that botched BDO-SSS deal more than a year ago. There are rumors that Dela Paz may not stay long as SSS president. If this is true, whoever is the successor would be a much-sought after personality as BDO pursues its merger plans.
An approval of two-thirds or 67 percent of EPCIs shareholders is needed to break the impasse and move ahead with the merger plan. BDOs Jan. 31 deadline, however, has lapsed without any agreement.
EPCIB directors have repeatedly announced that the merger offer is still under study, while BDO continues to sit out the indecisiveness of other EPCIB shareholders by saying that it is willing to extend the proposals deadline. So far, everything continues to be silent on all fronts except GSISs.
Now, whether there will actually be takers to its ads remains to be seen. Still, Garcia never fails to update all; latest, he announced that two groups (which he did not identify) had offered to purchase GSISs stake. It could all be braggadocio, but for the members sake, I hope there is something really cooking.
In the meantime, it seems that the only beneficiaries to this merger proposal are the market speculators, as can be seen in the volatility of EPCI and BDOs share prices. As one brokerage house says, EPCIBs search for a white knight is fanning speculative interest on the stock.
On the part of BDO, however, concerns that it may have to sweeten the offer to get the approval of shareholders are putting pressure on its share price.
Any improvement in EPCIB share prices will be good for GSIS and SSS. But to dream that GSIS and even SSS will get top price equivalent to what they shelled out more than six years ago could just be a little too much.
Lets admit it; EPCIB has gone through a lot in recent years since those days of massive deposit withdrawals when it was linked to the controversial Jose Velarde account. But even with more stringent regulations, EPCIB despite its being the current third largest will have to beef up its eroded asset and capital base. It would have to allot more provisions for probable losses that may arise from soured loans.
Simply put, all parties will need to agree on an honest-to-goodness valuation of EPCIB shares. The sooner all partisan stakeholders accept this, only then will things really start moving. So who or what can put an end to all of this? Everyone and everything has a price, my friends.
What are the priority measures that the Department of Energy is currently pursuing to facilitate economic growth? What is being done to address the relatively high electricity rates in the country compared to the rest of the Asian region?
"Breaking Barriers" on IBC-TV13 (12 mn every Thursday) will feature on Thursday, 23rd February 2006, Energy Secretary Raphael P. M. Lotilla. Join us break barriers and gain insights into the views of Sec. Lotilla on various issues related to the energy situation in the country. Watch it.
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Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com or at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://www.bizlinks.linkedge.biz.