Merger plan with Equitable on hold, says BDO's Tan

By Honey Madrilejos-Reyes
Reporter

BANCO de Oro Universal Bank (BDO) admits the SM Group’s five-man representation to the board of Equitable PCI Bank Inc. (EPCIB) would still not work effect the much-watched potential merger between the two lenders.

In a briefing last Friday, BDO president Nestor V. Tan said there should be two-thirds vote or around 67 percent of shareholders’ approval to implement the merger. The Sy family, which controls the SM Group, owns around 34 percent of EPCIB.

“In a negotiation, there should be a willing buyer and a willing seller. Our long-term plan is still for consolidation. We may not make it because the shareholders don’t want it,” said Tan. “In the meantime, we are putting it in the back burner and focusing on our organic growth.”

When asked how long they would keep the offer shelved, Tan said, “We are willing to talk but then we should also be realistic. If it is not going to happen, we will not push it.”
       

BDO submitted an offer letter to the EPCIB board last January for a merger with the former as the surviving entity. In the offer, EPCIB shareholders were offered 1.6 BDO shares for every EPCIB share then worth about P41.3 billion.
       

A merger between BDO and EPCIB could have created a bigger and stronger bank, with combined resources of over P500 billion.
       

“A bigger and stronger bank will ultimately be beneficial to the entire banking system and the banking public. The monetary authorities have been encouraging banks to consolidate, with the end in view of creating fewer but financially strong banking institutions,” BDO said in a previous statement.
       

Likewise, it said EPCIB shareholders stand to benefit from the transaction through an improvement in earnings from synergies, a potential appreciation in the stock price with the increase in market capitalization, and enhanced franchise value.
       

However, even without the merger, Tan is upbeat BDO would post better net profit this year to P3.1 billion from P2.54 billion in 2005. The income growth target would be driven mainly by the increase in traditional loan deposits.
       

Earlier, BDO said its first-quarter net income rose 25 percent to P706.5 million, compared to the year-ago figure.
       

BDO shares on Friday closed at P37, closing the week 2.78-percent higher, while EPCIB shares closed

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