MANILA, Philippines - ING Bank N.V. Asia is forecasting more mergers and acquisitions (M&As) in the Philippine corporate scene in preparation for the ASEAN integration.
Manolet Salak, head of ING Bank N.V. Asia Clients Coverage and Corporate Finance, said they see Philippine chief executive officers to be locked in more handshakes as corporate deal making, especially M&As, to gain added momentum for 2014-2015.
“We expect more Philippine companies to engage in M&A deals as local players push for more domestic consolidation in certain sectors and likewise look for international expansion in consideration of ASEAN moving closer towards becoming one regional market,†Salak said.
It likewise foresees potential activity for even cross-border expansion.
While the Bangko Sentral ng Pilipinas (BSP) offered M&A incentives to encourage more banking consolidation, ING Bank Philippine country head Consuelo Garcia said the entry of the bigger ASEAN banks may force Philippine banks to lock arms in order to compete.
“As it is, BDO (Unibank Inc.) already made public its plans of regional expansion. While it is already the Philippines’ largest lender, it only ranks 19th in size in the ASEAN market so an upsize makes strategic sense,†Garcia pointed out.
Several factors account for M&A activities picking up traction and deals among local corporates and with foreign players.
Increased confidence in certain sectors such as power, utilities and infrastructure is one.
For the existing players, expansion into selected assets gives them added scale, not to mention synergies brought by new projects into their own existing portfolios. For international players, it offers a chance for them to participate in the continuing Philippine economic growth.
The other reason is availability of funding sources. While the funding from the equities markets remain tricky and volatile, blue chip corporates can still count on the strong liquidity provided by banks and the peso fixed income capital markets.
As for outbound activities, major Philippine companies take stock of looking at the opportunities and challenges brought about by activities in the region, particularly the ASEAN market.
Relative to the ASEAN neighbors, Philippine corporates and financial institutions have hardly made significant forays into establishing their international presence and therefore face the risk of being left behind in establishing a credible and competitive network that can take advantage of bigger markets, diversified risk and access to new technology and best practices.
Last year, ING handled deals across a diverse client and sector coverage.
These included advising major network ABS-CBN Broadcasting Corp. on its P2.5-billion issuance of new Philippine Depositary Receipts to Capital International Private Equity Fund on the heels of its Destiny Cable acquisition and landing STT Telemedia (Starhub Singapore) as a strategic partner.
It also played financial adviser to both Philippine National Bank (PNB) and Allied Bank Corp. (Allied Bank) for their merger discussions.
ING Bank also acted as adviser to the Metropolitan Bank & Trust Co. (Metrobank) on the sale of its 30-percent stake in Toyota Motor Philippines to GT Capital Holdings.
The deal also boosted Metrobank’s balance sheet and capital position in response to the implementation of the new Basel III standards on capital adequacy and financial strength.
ING also advised a major food and beverage Philippine conglomerate on the divestment of its beer and drinks business in China.