Union Bank to acquire iBank for P13.5B

The Aboitiz-controlled Union Bank of the Philippines — the country’s 12th largest lender – will acquire smaller rival International Exchange Bank (iBank) for about P13.54 billion, the latest in the wave of mergers and acquisitions in the country’s banking industry.

Fe Macalino, Union Bank senior vice president and general counsel, late on Friday told the Philippine Stock Exchange that the bank’s board of directors had approved the plan to acquire between 67 percent to 100 percent of iBank, the 20th largest bank in the country, at a price of P42.50 per share.

The purchase price represents a 7.6 percent premium to iBank’s stock closing price of P39.50 last Friday.

Macalino said the purchase "shall be implemented within 30 calendar days and subject to regulatory and other pertinent approvals." She did not provide any other details.

Under the Securities Regulation Code, a group that acquires at least 35 percent of a listed company must make a tender offer for the rest of the shares on the same terms.

In a separate but related disclosure last Friday, investment holding firm iVantage Corp. said its board allowed it "to join the other major shareholders of the International Exchange Bank in accepting the offer of Union Bank of the Philippines," although it failed to identify the other major iBank shareholders involved.

iVantage owns a 19.99-percent stake in iBank, the second largest single block, next only to JTKC Equities Inc., which holds 24.58 percent. Razon Industries Inc., owned by International Container Terminal Services Inc. (ICTSI) chairman Enrique Razon, is the third biggest stockholder in iBank with a 15.6- percent stake. Last week, Razon purchased the entire 23-percent stake of A. Soriano Corp. (Anscor) in ICTSI for P5.91 billion.

The other major stakeholders of iBank are Greenhills Property Inc. with 8.89 percent; Philippine Realty and Holdings Corp., 8.1 percent; and iBank president and chief executive officer Ramon Y. Sy, 3.3 percent. Sy was recently elected president of the Bankers Association of the Philippines (BAP).

With the acquisition of iBank, Union Bank’s asset base would bloat to P160 billion and land it within the top 10 banks in the Philippines.

Union Bank will likewise expand its capital base to P16 billion and increase its branch network to 190 branches plus an estimated ATM network of 172 and a deposit base of more than P100 billion.

On the other hand, iBank, which has been struggling to increase its equity base due to adjustments to the new accounting standards, had a capital base of just P6.6 billion.

Union Bank officials said earlier that the bank aims to be among the country’s three largest banks by 2010, pushing this through an annual income growth of between 25 to 30 percent and outright acquisitions.

Union Bank has been growing by a compounded annual rate of more than 20 percent in the past five years. Last year, it recorded a 21-percent increase in net income to P2.76 billion from P2.28 billion in 2004. In 2003, net income was recorded at P2.15 billion from P1.5 billion in 2002 and P1.1 billion in 2001.

Total resources expanded to P108 billion, boosted by the P6-billion expansion in deposits and 27 percent growth in fund float volume. Deposits grew to P60 billion, principally from the increase in savings deposits.

Strong internal capital generation pushed its equity base 27 percent higher to P9.5 billion in 2005. It also remained among the soundest banks in the industry with a credit risk-adjusted capital adequacy ratio (CAR) of 46 percent, way over the Bangko Sentral ng Pilipinas (BSP) minimum capitalization ratio requirement of 10 percent.

Based on its estimates, Union Bank would corner a retail customer base of 1.5 million and at least 3,000 corporate clients by 2010.

Last year alone, it made a bid to acquire the semi-government Philippine National Bank (PNB) but eventually lost out to taipan Lucio Tan, who was already PNB’s single biggest stockholder.

Union Bank stakeholders are led by Aboitiz Equity Ventures Inc. (AEV) with 37.46 percent; Insular Life Assurance Co. Inc., 18.75 percent; the Social Security System, 16 percent; Davao Light and Power Co. Inc., 3.55 percent; Cotabato Light and Power Co. Inc., one percent. The Aboitiz group controls AEV, Davao Light and Power, and Cotabato Light and Power.