EBC bites SM buy offer

BY RUBY ANNE M. RUBIO, BusinessWorld Reporter Sy-led holding firm SM Investments Corp. (SM) got closer to gaining full control of Equitable PCI Bank and merging it with Banco de Oro (BDO) Universal Bank following fruitful negotiations with EBC Investments, Inc. The latter, a subsidiary of Equitable PCI, is selling its 10.84% stake in the country’s third largest lender. In a letter to the exchange, Equitable PCI Corporate Secretary Sabino E. Acut, Jr. said the board of directors of EBC Investments, Inc. had accepted the binding offer of Teresita T. Sy on behalf of the Sy family to buy the bank’s 78.81 million common shares worth P7.25 billion. EBC Investments, the wholly owned investment banking subsidiary of Equitable PCI, has failed to sell the Treasury shares due to prevailing low share prices. Last year, the Monetary Board rejected Equitable PCI’s request for the central bank to give it five more years within which to sell the disputed shares. The sale of the Treasury shares will boost Equitable PCI’s capital in line with new international accounting standards and stricter capital rules under Basel 2. SM earlier said it would offer P44.15 billion to gain full control of Equitable PCI. SM, which now has a 25% stake in the bank, said it would offer P92 per share, or up to P36.9 million, for a controlling stake in the bank. SM, which owns the country’s fourth-largest lender, BDO, also offered to buy EBC Investments, Inc.’s 10.84% stake in Equitable PCI. EBC Investments has 78.81 million common shares that will be bought at P92 per share, payable in cash and subject to corporate and regulatory approvals and the terms set in an Aug. 29 letter offer of Ms. Sy. Meanwhile, hurdled by a yet- unresolved legal case, Social Security System is buying time in allowing the Sy-led group to purchase the pension fund’s more than 20% stake in Equitable PCI Bank. SSS President and Chief Executive Officer Corazon S. de la Paz said the state pension fund had asked Justice Secretary Raul M. Gonzalez anew to urge the Supreme Court to rule on a two-year-old case involving the sale of its stake to the Sy family. The high court earlier issued a status quo order that stopped a supposed Oct. 20, 2004 auction of the SSS shares after lawmakers alleged that the sale was disadvantageous to the government. At that time, Mr. Sy’s offer price was P43.50 for each SSS share in the bank. "We’ve requested the secretary of Justice to help us come up with an early resolution. We’d like to take advantage of whatever offer is there," Ms. de la Paz told reporters on Thursday. She said a further delay in the case might translate into the pension fund’s share fetching a price even higher than the P92-per-share offer of the SM group. She said there had been other investors who have expressed interest in buying the SSS shares in EPCIB, which the pension fund must look into. "We have to get back to [the other buyers] now that there was an offer [from the SM group]," Ms. de la Paz said. "At the end of the day, it’s all a question of valuation. It’s a good offer, but marami kaming pera. Hindi kami nagmamadali [We are very liquid. We are not in a hurry]," she added. On Thursday, SM shares closed 1.83% stronger at P222, while BDO went up 1.37% to P37. Equitable PCI was unchanged at P79. SM, together with Shoemart, Inc., Multi-Realty Development Corp. (MRDC), Sysmart Corp., Syntrix Holdings, Inc. and Sybase Equity Investments Corp., will buy the remaining 55.16% of Equitable PCI equivalent to 401.02 million shares held by various indvidual and corporate shareholders and stock brokerages. The tender offer started on Thursday and will end on Sept. 28. The transaction is expected to be completed by Oct. 2. Ten percent of the shares will be payable on Oct. 2, 10% on June 2, 2007, 10% on Feb. 2, 2008 and 70% on Oct. 2, 2008. SM earlier said its move was meant to consolidate its holdings in Equitable PCI. With the impending implementation of Basel 2 and the effects of the new reporting standards, it is willing to put in more capital to ensure that Equitable PCI meet its capital requirements. SM has interests in retail merchandising, shopping malls, banking and finance, real estate and tourism. SM said it was keeping its option to merge Equitable PCI with another bank if the business case for it is present, to strengthen its balance sheet. Mall magnate Henry Sy controls Banco de Oro and holds more than 34% of Equitable PCI through various entities. The other major stockholders are Social Security System, which has a 29% interest, state-run Government Service Insurance System with a 12.7% stake and Trans Middle East (Philippines) Equities, Inc., with 7.13%. -- with Maria Eloisa I. Calderon/BusinessWorld