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| PNB Merger will enhance competitiveness | |
The much-anticipated merger between the Philippine National Bank (PNB) and Allied Banking Corporation, both controlled by tycoon Lucio Tan, is coming into fruition with the approval of the merger plans by their respective board of directors on April 30.
The merger will be effected through a share-for-share exchange. Under the proposed terms, PNB will serve as the surviving entity whereby it will issue to Allied Bank shareholders 140 PNB shares for every Allied Bank common share and 30.73 PNB shares for every Allied Bank preferred share. The PNB shares will be issued at 55 pesos each (US$1.30).
The merged bank will retain the PNB name. With a combined distribution network of 626 branches and 614 ATMs nationwide, it will become the Philippines’ third largest private domestic bank in terms of branches and the fourth largest in terms of total assets (388 billion pesos), net loans and receivables (141 billion pesos) and deposits (297 billion pesos) as of December 31 2007. In addition, it will have the largest international footprint across the Asia-Pacific region, Europe, the Middle East and North America.
The merger brings together a combined complementary client base ranging from large corporations, local government units and government-owned and controlled corporations, overseas Filipino expatriates, the Chinese-Filipino community to the provincial market.
The merged bank will also be able to leverage and harness on the wide network of its major shareholder, the Lucio Tan group, which is one of he largest conglomerates in the Philippines.
“The merger will have a positive impact on the overall financial performance of the new bank given the complementary client base, enlarged distribution platform, strong capital position and expected merger synergies,” says PNB president and CEO Omar Byron Mier, in a statement.
The merger is likewise expected to create substantial revenue and cost synergies. Revenues should be enhanced as a result of new customers, increased business from existing customers, low funding cost from improved risk profile and greater opportunities for cross-selling bancassurance, trust, credit cards and other products to a large customer base via a wider distribution network.
“The merger will enhance our competitiveness in the banking industry and widen our reach to customers with more products and services offerings, which will help create shareholder value,” adds Allied Bank president Reynaldo Maclang.
The merger is subject to shareholders’ and regulatory approvals and is anticipated to close in the third quarter of 2008. ING Bank is advising the majority shareholders of Allied Bank and PNB on this transaction, while UBS is acting as the financial adviser to the board of PNB.
Following the announcement of the merger, Moody’s Investors Service upgraded PNB’s local currency deposit rating and subordinated debt rating to Ba1 and Ba2, respectively. This is based on improvements in PNB’s capital and profitability, which have reduced the likelihood that it will require future outside assistance. It says the merger will augment PNB’s financial fundamentals and provide it with a wider distribution network, though these improvements are tempered by merger-related risks.
Previously, the merger had been stalled by legal proceedings concerning the ownership of Allied Bank, the judgement of which was passed in favour of the Lucio Tan group by the High Court in December 2007, and affirmed by the Supreme Court in January 2008. – CS
