Solon favors SM price for EPCI

BY PAUL C.H. HOW, BusinessWorld Reporter The primary complainant in a suit questioning the Social Security System’s (SSS) planned sale of its 26% stake in Equitable PCI (EPCI) Bank two years ago favors the P92 share price being offered by the Sy-led SM Investments Corp. But Senator Sergio R. Osmeña III said the Supreme Court would still have to decide whether the so-called Swiss challenge mode of sale is applicable to the state pension fund. "That’s a good price [P92 per share]. Right now, we have an open auction. [Sy-owned] Banco De Oro (BDO) Universal Bank is saying it’s offering to buy [the rest of the EPCI stake] at P92. Anybody can come now and say ‘I’m buying at P94,’ the solon said. Still, the high court must set a precedent since its decision would affect the sale or purchase of shares by government agencies in the future, Mr. Osmeña told BusinessWorld. In October 2004, the high court stopped the SM Group from acquiring the SSS’ 26% stake in EPCI at P43.50 per share, on a petition by Mr. Osmeña and four other senators. Two months earlier, the SSS board agreed to a Swiss challenge, where BDO subsidiary BDO Capital Investment Corp. was allowed to match the highest bid during a scheduled auction on Oct. 20, 2004. The lawmakers alleged that the government would lose P3 billion from the transaction, which would have given undue advantage to BDO Capital and discouraged challengers. Under the agreement, BDO Capital would have been offered the shares in case there were no qualified bidders. While the tribunal has issued a status quo order, it has yet to rule on the propriety of the Swiss challenge mode. The SSS has asked Justice Secretary Raul M. Gonzalez to seek an early resolution of the dispute before the high court. Mr. Gonzalez has refrained from commenting on the validity and legality of the Swiss challenge adopted by the SSS and BDO Capital given the pending Supreme Court case. In an Oct. 11, 2004 legal opinion, the Justice secretary merely quoted a previous opinion stating that the sale mode could be used "for as long as the Swiss Challenge proposal approximates the nature and requirements of a public bidding that are essentially transparent and competitive." SSS Spokesman Joel P. Palacios noted that even if the pension fund chooses not to use the Swiss challenge mode, "we will still have to inform the court that we are selling the shares at a certain price because there is a pending case." "We will have to say we’re not using the [Swiss challenge] anymore, and won’t be selling at the old price of P43.50. You cannot ignore the courts." SSS’ stake in EPCI has increased to 29% since 2004. EPCI shares closed at P79 apiece last Friday. The SM Group, which owns 30% of EPCI shares, hopes to eventually merge BDO with EPCI once it gains full control of the latter. Once the two are merged, EPCIB will become the country’s second-biggest lender, next to Metropolitan Bank and Trust Co.