Tan wins back Allied Bank, looks at merger

Of all the cronies of the late Philippine dictator Ferdinand Marcos, Chinese-born tycoon Lucio Tan stands out as one of the most durable — and for that reason remarkable.

In the two decades since Marcos fled into exile following the so-called People Power revolt in 1986, Tan has expanded a formidable empire in tobacco, beer, aviation and banking.

This makes Tan different from many associated with the Marcos era, whose empires faded away while his flourished.

And this despite losing some of his shareholdings to the government following the collapse of the Marcos regime.

Despite allegations of being given favorable treatment by Marcos, Tan has managed to get back most of what he lost in court battles spanning nearly two decades.

The 71-year-old businessman, who was born in China’s Fujian province, saw his latest victory on Dec. 7 when the Supreme Court lifted the government’s sequestration of Allied Bank, which is controlled by Tan.

The court declared null and void an order by the Presidential Commission on Good Government (PCGG) for the sequestration of Tan’s shares in Allied Bank, Fortune Tobacco and Foremost Farms and Shareholdings Inc.

The commission is a government body tasked with recovering the allegedly ill-gotten wealth of the late President Marcos and his cronies.

Analysts and bank officials say the court’s ruling now paves the way for a merger between Allied Bank and another Tan-controlled bank, Philippine National Bank (PNB).

“The merger will probably happen next year,” PNB president Omar Tyrone Mier told AFP, although he would not give any details or date.

Tan set up Allied Bank in 1977 and while he only owns 13 percent personally, most of the remaining shares are held by close Tan allies. It has a market capitalization of P10 billion.

PNB, once a government bank and formerly the country’s largest commercial bank, was set up 91 years ago and privatized in 1989.

Tan now owns 67 percent of the bank, with the remainder largely held by foreign fund managers.

It has a market capitalization of about P30 billion, Mier said.

The PCGG says it will file a motion for reconsideration of the Supreme Court’s decision, but Mier said it was a “long shot” that the ruling would be reversed.

“Even with a motion for reconsideration, the merger will still take place next year,” Mier said.

“We will not give up Allied Bank,” said PCGG commissioner Narciso Nario, stressing that his agency will not cease its efforts to gain control of the bank.

Even when PNB and Allied Bank are merged into one, it will still be only the fourth largest bank in the Philippines but Mier said increasing its size is necessary.

“In the banking industry, size matters. It means you have more muscle to expand your portfolio, your branches, your borrowing limit goes higher,” he said.

He added smaller banks are considering merging because they are becoming less competitive.

PNB and Allied Bank bring different qualities to the merger, said James Lago, research chief of Westlink Global Equities Inc.

PNB has a recognizable brand name, and extensive network and background with the millions of Filipinos working overseas who use PNB to remit billions of dollars to their families back home.

Allied Bank meanwhile has the accounts of Tan’s companies as well as extensive contacts with the Filipino-Chinese business community, who are a major player in the country’s retail, food processing and manufacturing sectors, said Lago.

But he warned that “the merger of different cultures of the two banks will take at least two years. There are two entrenched cultures there, especially at PNB.”

With the heat on, some of the country’s biggest banks are meanwhile considering new acquisitions to make themselves larger.

But as the wily Tan has demonstrated down the years, his durability is not in question.