UnionBank to kick off P40 billion stock rights offer

MANILA, Philippines — The stock rights offering of Aboitiz-led Union Bank of the Philippines is set to kick off this month to raise as much as P40 billion to partially fund the acquisition of the consumer lending business of global banking giant Citigroup in the country.

Based on a prospectus submitted to the Philippine Stock Exchange (PSE), the listed bank is offering 800 million rights shares to eligible shareholders at a price range of  P64.55 to P73.78 per share.

The final price will be determined on April 4, while the offer period will be from April 25 to May 6.

CLSA Exchange Capital Inc. and ING Bank NV Manila  are the joint global coordinators and joint domestic underwriters for the fund raising activity.

Existing shareholders, including Aboitiz Equity Ventures, Insular Life Assurance Co. Inc., and pension fund manager Social Security System (SSS) have committed to fully subscribe to their respective allocations, as well as to any shares not taken up by other shareholders.

Last December, UnionBank said it would shell out around P55 billion for the acquisition of Citi’s retail banking business in the country.

UnionBank president and CEO Edwin Bautista earlier told The STAR that the net asset value was about P9.7 billion.

For its part, Citi said UnionBank would pay a cash consideration for the net assets of the acquired businesses, plus a premium of P45.3 billion, subject to customary closing adjustments.

Upon closing, Citi expects the transaction to result in the release of approximately $300 million of allocated tangible common equity, as well as an increase to tangible common equity of approximately $500 million.

Aside from Citi’s credit card, personal loans, wealth management, and retail deposit businesses, the acquisition also includes Citi’s real estate interests which inlude  Citibank Square in Eastwood, three full service bank branches, five wealth centers, and two bank branch lite units.

The closing of the Citi acquisition is conditional upon satisfaction or waiver of conditions precedent customary for similar transactions, including approval by the Philippine Competition Commission approval of the Bangko Sentral ng Pilipinas  prior written consent of the Philippine Deposit Insurance Corp.  approval by the Insurance Commission, and approval also of the Securities and Exchange Commission.

UnionBank expects to complete the acquisition in the second half of this year after regulatory approvals have been obtained.

The Aboitiz-owned lender expects the Citi acquisition to increase its consumer loan portfolio, net interest margins, and overall profitability in the long-run.

In April last year, the New York-based bank announced it was exiting the retail banking landscape in the Philippines and 12 other markets in Asia, as well as in Europe, the Middle East and Africa (EMEA) region, to focus its global consumer bank presence on Singapore, Hong Kong, United Arab Emirates and London.