Sy Group rules out 3-way merger among BDO, EPCIB, China Bank

The Sy group said a three-way merger among Banco De Oro, Equitable PCI Bank and China Bank is unlikely at this point.

"Let’s wait for the tender offer to be completed first. Hopefully, everything would be finished by the end of September or first week of October," said SM Investments Corp. (SMIC) vice chairman Tessie Sy when asked about the possibilities of a mega-merger between the three banks.

The Sy group, through SMIC, offered to buy out other shareholders of EPCI Bank at P92 per share for a total of P44.15 billion, payable over a two-year period.

The SM group, which includes BDO, owns the single biggest stake of 34 percent in EPCI Bank.

So far, only EBC Investments Inc. has accepted the Sy group’s offer to acquire its 78.81 million shares, representing a 10.8 percent stake in EPCI Bank, for P7.25 billion.

The Government Service Insurance System (GSIS) is also expected to sell out its EPCI Bank shares to the Sy group as it found the P92 offer price acceptable to them.

The SM Group proposes to pay the total tender offer amount in tranches: 10 percent on Oct. 2, 2006; 10 percent on June 2, 2007; 10 percent on Feb. 2, 2008 and 70 percent on Oct. 2, 2008.

The acquisition of a commanding controlling block is expected to result in the eventual merger of EPCI Bank with BDO.

Aside from Banco de Oro and GSIS, other major shareholders of EPCI Bank are state pension funds Social Security System, which owns 26.6 percent; and the Romualdez family’s Trans Middle East Phiippines Equities, which holds 7.1 percent.

The SM group’s tender offer was in line with efforts to infuse more funds in EPCIB to help meet its capital requirements and prepare it for Basle II and the new reporting standards.

It said it was also keeping its option to merge EPCIB with another bank to further strengthen EPCIB’s balance sheet. Such a merger will, however, be subject to approval of EPCIB shareholders and regulators, SMIC said.

The tender offer commenced on Aug. 31 and will end on Sept. 28, 2006. The transaction is expected to be completed on Oct. 2, 2006.

Macquarie Research said the planned merger of BDO with EPCI Bank should materialize since another failed deal would be detrimental to both banks.

"For EPCI Bank, delays would mean confusion over its strategic direction, while for BDO, it would run the risk of operational distraction, which could derail its recent string of good organic growth," Macquarie said in a report.

According to Macquarie, BDO plans to proceed quickly with the merger should the offer be accepted.

"While the merger may formally take place in mid-2007 due to shareholder and regulatory approvals, management suggested that integration groundwork could begin even earlier," Macquarie said.