EPCIB board weighs SM’s buyout offer

The board of Equitable PCI Bank (EPCIB) said yesterday it would "consider and study" the buyout offer made by SM Investments Inc. (SMIC) for the remaining two-thirds of the bank, valued at nearly P37 billion.

However, the offer will have to wait until mid-September when the board would have discussed the results of a study regarding the real value of a 10.8-percent block in the form of treasury shares held by EPCIB subsidiary EBC Investments Inc. (EBCII).

SMIC offered P7.25 billion or P92 per share for the EBCII shares. Last Aug. 18, the EPCIB board decided to sell the contested shares.

EPCIB vice chairman Winston Garcia said that the tender offer reflects the true value of the EBCII-held shares.

"Acceptance of the tender offer made by SM Investments Inc. would benefit the bank, the buyer, the stakeholders, and especially the government financial institutions," Garcia, also president and general manager of the Government Service Insurance System (GSIS), said.

Garcia stressed that the prices reflected in the stock market are actually lower than their real value.

He said a refusal by the board to sell would actually mean more expenses for the bank, as this would entail the need for more capital infusion to meet the stiff requirements under the global Basel II standards for the banking industry.

SMIC, through its banking unit Banco de oro (BDO), holds a 34 percent interest in EPCIB. Other major shareholders of EPCIB are state pension funds Social Security System and GSIS, which own 26.6 percent and 12.7 percent, respectively; and the Romualdez family’s Trans-Middle East Philippines Equities, which hold 7.1 percent.

Garcia said SMIC’s offer price of P92 per share is acceptable to them as long as this transaction would not undergo a long and tedious process. "We will consider P92, this is the price we have been demanding all along. But we don‚t want to go to a cash call. We don’t want a long process."

A cash call is undertaken to meet the capital adequacy ratio requirement of the Bangko Sentral ng Pilipinas and Basel II.

SMIC said it is willing to put in more funds in EPCIB to meet the capital requirements and prepare it for Basel II and new reporting standards.

The holding company also said it is keeping its option to merge EPCIB with another bank, if the business case for it is present, to further strengthen EPCIB’s balance sheet. Such a merger will, however, be subject to approval of EPCIB shareholders and regulators, SMIC said.

The tender offer will commence on Aug. 31 and end on Sept. 28, 2006. The transaction is expected to be completed on Oct. 2, 2006.