BDO okays merger with EPCIB

Banco De Oro Universal Bank (BDO), the banking arm of retail tycoon Henry Sy’s SM Group of Companies, approved yesterday a plan to merge with Equitable PCI Bank, creating the country’s second largest bank in terms of assets.

In a disclosure to the Philippine Stock Exchange, BDO said its board "deemed it advisable and in the best interest of both the bank and EPCIB, and their respective stockholders that (they) engage in a business combination to be effected through a merger in order to advance the long-term strategic business interests of both institutions."

Under the plan, BDO will be the surviving corporation of the merger and accordingly, all the issued and outstanding common stocks of EPCIB will be converted into fully-paid and non-assessable common stocks of the merged bank.

At the same time, the BDO board approved the increase in its authorized capital stock to P65 billion divided into 5.5 billion common shares and one billion shares with a par value of P10.

A special meeting has been set on Dec. 27 for the purpose of approving the merger and the increase in capital stock.

The merged entity is expected to dislodge the Ayala-controlled Bank of the Philippine Islands which had assets of P525.96 billion as of end-September 2006.

Metropolitan Bank and Trust Co. of tycoon George S.K. Ty remains the largest bank in terms of assets with total resources of P629.6 billion.

EPCIBank’s and BDO’s combined assets totaled P614.8 billion as of Sept. 30 this year. EPCIB had consolidated total assets of P324.4 billion while BDO’s resources stood at P290.4 billion.

"It’s not a surprise. The merged institution is going to be a bank to reckon with, a bank to watch out for in the years to come. I’m sure that Metrobank and BPI will find ways to maintain their standing. I wont even be surprised if BDO ends up as the number one bank in the next few years given the Sy group’s financial muscle," said First Grade Holdings managing director Astro Del Castillo.

Del Castillo said the merged entity will create a powerhouse institution with a major presence in retail banking and foreign exchange remittances.

The merger will give the SM Group access to EPCIB’s 227 remittance centers in cities with large Filipino populations, such as San Francisco and Los Angeles. BDO has one remittance center in Hong Kong and receives remittances through alliances with companies outside the Philippines.

BDO’s remittance business has helped boost sales at SM Prime’s malls. In turn, the bank uses its branches at the malls to lure and keep clients.

SM Investments Corp., the listed investment holding company of the Sy family, made a tender offer from Aug. 31 to Sept. 29 to shareholders of EPCI in its bid to increase its stake in the latter from 34 percent to 67 percent – a level that will allow it to effect a merger between the two banks.

Major shareholders of EPCIB, accounting for 51.6 percent of the bank, agreed to sell their stakes to BDO, which should raise its stake in EPCIB to 85.6 percent. SMIC acquired additional EPCIB shares for P34.49 billion or P92 each share. Payment for the shares will be made over a period of two years.

Excluding the shares held by state pension fund Social Security System, SMIC currently holds nearly 60 percent of EPCIB. The decision of SSS to sell its 25.8-percent stake in EPCIB, is still subject to a resolution of a case pending at the Supreme Court.

Other shareholder groups that sold their stake in EPCIB include the Government Service and Insurance System (13.5 percent), EBC Investments Inc. (10.8 percent), and minority shareholders comprising 1.34 percent of the bank.

Since its listing in May 2002, BDO has grown steadily, partly through the acquisitions of small bank operations, such as local branches of Singapore’s United Overseas Bank Ltd. and Banco Santander Central Hispano SA of Spain.