Biggest foreign investment in a local bank: Japanese giant buys into Security Bank for P37 B

MANILA, Philippines - Security Banking Corp. and the Bank of Tokyo-Mitsubishi UFJ Ltd. (BTMU) inked yesterday a P36.9-billion deal, the largest equity transaction involving a financial institution by a foreign investor in the Philippines.

The deal would make Security Bank the country’s fifth largest bank in terms of capital after Metropolitan Bank & Trust Co., BDO Unibank, Bank of the Philippine Islands, and Philippine National Bank.

Security Bank chairman Alberto Villarosa said Japan’s largest bank, through Mitsubishi UFJ Financial Group (MUFG), would acquire a 20 percent stake in the listed bank.

“This acquisition is expected to close by around the second quarter of 2016 and once completed the transaction will be the largest equity investment in a Philippine financial institution by a foreign investor,” he said.

Villarosa said BTMU would become the second largest shareholder in Security Bank next to the Dy Group and would be entitled to two board seats.

He said BTMU’s investment would increase the capital base of Security Bank to P89.3 billion from the end-September level of P52.4 billion.

Villarosa said the P36.9-billion capital infusion would be used in pursuing Security Bank’s growth initiatives and strategy.

“Equally important to this partnership is the commitment of both institutions to a mutually beneficial business collaboration initiatives leveraging on BTMU’s large global presence and Security Bank’s strong domestic franchise,” he said.

Security Bank chairman emeritus Frederick Dy said the strategic partnership is significant not only for BTMU and Security Bank but more importantly to the country’s financial system.

“This partnership will enhance Security Bank’s shareholder value by accelerating its growth strategy and business initiatives. More importantly it is a game changing development that changes the landscape of Philippine banking,” Dy said.

Dy said Japan’s largest bank is an icon not only in the Japanese financial markets but in the Asian and global markets as well.

 “I consider the investment of BTMU as a validation of Security Bank’s reputation both here and abroad for the sound fundamentals and excellent corporate governance the bank exudes,” Dy said.

Security Bank president and chief executive officer Alfonso Salcedo Jr. said BTMU would acquire 150.707 million newly issued Security Bank primary shares at P245 per share and 200 million preferred shares at P0.10 per share for a total investment of P36.9 billion.

The acquisition price represented an 81.5 percent premium over Wednesday’s closing price of P135 per share.

“The additional capital will help us accelerate our strategy over the next three to five years of building our retail banking business as a third business pillar alongside wholesale banking and financial markets,” Salcedo said.

Likewise, Salcedo said the bank’s branch network would grow much faster to more than 500 branches by 2020 from the current 262 branches nationwide.

The Philippine Stock Exchange halted trading in shares of Security Bank after the said it would disclose details about a ‘significant transaction.’ The share price of the bank hit a high of P156 per share before closing at P144 yesterday from Wednesday’s P135 per share.

BTMU Asia & Oceania Region chief executive officer Go Watanabe said talks with Security Bank has been ongoing for almost a year and the Japanese bank has earned the trust and confidence of the shareholders of Security Bank.

Watanabe said Japan’s largest bank has been focusing on Asia as one of its core markets for growth having adopted an equity business alliance model in the region including in Vietnam wherein it bought a 20 percent stake in VientinBank CTG in end 2012 and in Thailand where it acquired a stake in the Bank of Ayudhya in end 2013.

 “It is a strategic intent for the bank to identify the right partner in the higher growth markets like the Philippines to deepen our presence, including through inorganic means,” he said.

Watanabe said Security Bank has distinguished itself over the years with superior growth, profitability, asset quality, and capital strength.

Furthermore, he revealed BTMU has an existing partnership with Security Bank that started in 2011.

Watanabe said the deal would boost BTMU’s efforts of becoming a Tier 1 global financial institution in the Asian market by 2020.