Court urged to junk plea vs PNB-Allied merger

Tycoon Lucio Tan has asked the Sandiganbayan to junk a petition filed by the Presidential Commission on Good Government (PCGG) and the Office of the Solicitor General (OSG) seeking to stop the ongoing merger of Allied Bank and Philippine National Bank (PNB).

In a 29-page opposition filed by his lawyers, former solicitor general Estelito Mendoza and his co-counsel Orlando A. Santiago, Tan said the government’s filing of the TRO and injunction petition represented government meddling in corporate matters.

Mendoza pointed out that despite the pendency of the case for over 20 years, no evidence has been presented by the PCGG or OSG to support the state’s claim over the disputed shares of stocks of Allied Bank.

He noted that in fact, the testimony of the government’s latest witness, former General Bank and Trust Co. stockholder and vice president Joselito Yujuico, intending to bolster the said claim, was thrown out by the graft court’s Fifth Division last week for being inadmissible.

“Indubitably then, plaintiff (Republic of the Philippines) does not show in its application for injunction that it has a clear, present and unmistakable right to shares of stock in Allied Banking Corp., or to any of its assets for that matter. Absent such showing, the motion merits peremptory denial,” Tan’s lawyers said.

In a motion filed last Dec. 18, the OSG and PCGG asked the court to issue a TRO or a preliminary injunction to halt the PNB-ABC merger.

Tan controls approximately 75 percent of Allied Bank and 67 percent of PNB.

Government is seeking forfeiture of Tan’s stake in Allied Bank based on the claim that he acquired them using public funds.

The OSG argued that if the merger is implemented and the court rules in its favor, the state can no longer thake possession of Allied Bank’s assets.

Tan argued that even assuming that the court will render what he described as a ‘highly improbable’ ruling in favor of the government, the shareholders of Allied Bank would benefit rather than be adversely affected by the merger.

He noted that the Bangko Sentral ng Pilipinas has even provided incentives to banks that will merge or consolidate to strengthen protection for the country’s banking industry from the negative effects of the United States financial meltdown and to make services to customers more efficient.

Tan explained that a PNB-Allied Bank merger will create the country’s fourth biggest bank in terms of assets and third biggest in terms of the total number of branches.

At present PNB is ranked fifth in assets while Allied Bank is at eleventh spot.

“An enlarged bank will also have the greater capacity to lend (because of its larger capital base) to large corporations, small-and-medium size enterprises and individuals and this will contribute to further development of the country,” Tan’s lawyers added.

In addition, they explained that Allied Bank has been seeking mergers with other banks for years but it was shunned in the industry because for over a decade, it was under government sequestration.

In 2006, the Sandiganbayan nullified PCGG’s sequestration of Tan’s companies including the writ covering shares in Allied Bank. This ruling was affirmed by the Supreme Court in 2007 which junked government’s appeal with finality.

“On the contrary, it was the prolonged sequestration of the shares of stock, and the continuing pendency of this case – attributable to the plaintiff – which have imperiled (their) value. The plaintiff should indeed welcome the proposed merger,” they said.

And since under the merger, common shares of Allied Bank held by the various stockholders would be exchanged with the agreed number of PNB shares, there is no danger that they will become untraceable.

“In short, the corresponding PNB shares which the stockholders receive in exchange with Allied Bank shares, including those which are involved in the instant action, would be readily identifiable,” they added.