TUCP urges GSIS to back down on EPCIB buying

The Trade Union Congress of the Philippines (TUCP) is warning the Government Service Insurance System (GSIS) against hoarding more shares of Equitable PCI Bank (EPCIB).

The caretaker of the pensions of civil servants plans to sell its 12.4-percent equity stake in EPCIB to an unnamed foreign buyer.

Former senator and TUCP general secretary Ernesto Herrera dismissed as "preposterous" GSIS‚ reported plan to liquidate a large investment in fixed-income government securities (GS) in order for the government pension fund to have cash to buy more EPCI shares.

"That is simply not possible. Under the law, GSIS cannot put all or most of its eggs in one basket. There are specific limits as to how GSIS may invest the hard-earned contributions of its members in certain types of instruments," Herrera said.

"If the intention is to accumulate more EPCIB shares so that the pension fund can make a quick profit by auctioning a larger stake that will command a higher price, then that is irresponsible and reckless in the absence of a definitive offer from a buyer," Herrera aqdded in a press statement.

GSIS set April 6 as the deadline for interested parties to make an offer for the pension fund’s 90,078,333 shares in EPCI at a minimum of P92 per share in cash, or a total of P8.29 billion.

GSIS president Winston Garcia reportedly said he had a foreign buyer willing to acquire at P95 per share not only the pension fund‚s stake in EPCI, but up to 80 percent of the bank’s issued stock.

Garcia added that he issued a buy order for 10 million EPCI shares in the open market, on top of the shares that GSIS already owns. He likewise said GSIS is willing to buy the 10.8-percent stake of EBC Investments Inc. in EPCI at P92 per share. Herrera urged Garcia to get the purported buyer of GSIS‚ stake in EPCI to agree to pay a termination fee to the pension fund in the event the purchase is not consummated.

Herrera said a covenant on a contingent termination fee would demonstrate the buyer‚s resolve to get the deal done, and at the same time provide GSIS insurance against accompanying investment risks.

A termination or break-up fee is a pre-agreed amount to be paid by a party, should it decide to walk away from a contemplated purchase or sale. The fee is meant to compensate for the time, resources, effort and lost opportunity costs and risks incurred by a disappointed seller, or buyer.

"This will also end speculation that GSIS is merely bluffing and hyping the stock market with a purported mystery buyer that supposedly has a superior offer to buy the EPCI shares," Herrera said. EPCI’s stock closed Friday at P75. Over the last 52 weeks, the stock has traded between as low as P42 to as high as P83. At P75 per share, and with 727,003,345 shares issued, the bank has a market value of P54.5 billion.