Union Bank announces P17-B stock rights offering

Union Bank [UBP 41.50 unch; 70% avgVol] [link] disclosed that it plans to conduct a stock rights offering (SRO) to sell 450,204,078 UBP common shares to existing UBP shareholders at a price somewhere between P33.73 and P38.23 per share. UBP will set the price and the entitlement ratio for the SRO on May 2. The Ex-Date is May 8, with a Record Date on May 9. The offer period will run from May 16 through May 24, with a tentative listing on May 31. The plan to conduct an SRO was approved by UBP’s board back in January. At the time, the board said the proceeds would be used to “fund the capital infusion into UnionDigital” and for “projected retail loan availments.”

MB bottom-line: The main difference between a stock rights offering and a follow-on offering is that with a stock rights offering, only existing shareholders can participate, and even then, only up to the limit of their proportional holdings. In basic terms, each shareholder gets a quota of shares they can buy, and it’s up to each shareholder to exercise that right (or not). It’s fairly common for SROs to be priced at a tasty discount relative to the stock’s market price, and here the range that UBP provided for the potential price implies a discount of between 7.8% to 18.7% relative to UBP’s closing price on Friday. I guess we’ll find out next Thursday!

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