Banco de Oro, EIB asset deal nears completion: But EIB will be transformed into a shell company indefinitely

MANILA, Philippines - When the deal between Banco de Oro Unibank Inc. (BDO) and Export and Industry Bank (EIB) are finalized, the latter will be transformed into a shell company without assets or liabilities.

When the purchase of assets agreement between the two entities are signed – and BDO gets the nod of the Bangko Sentral ng Pilipinas (BSP) – the universal bank of the SM Group of Companies will take over all the liabilities and assets, including EIB’s 50 branches and 80,000 deposit accounts.

EIB’s assets are worth P19 billion but liabilities stood at P31 billion as of end June 2010. Liabilities include the P9-billion financial assistance package from the Philippine Deposit and Insurance Corp. (PDIC) implemented in 2006.

In a press briefing held yesterday after a stockholders’ meeting, EIB chairman Jaime C. Gonzales said that its board of directors have not decided what will become of the company after the BDO deal would be consummated. He also said that the board has still to decide whether it will lift the suspension of trading of its shares listed at the Philippine Stock Exchange (PSE).

“We will not have any residual assets after the deal,” Gonzalez told reporters. “We do not know how long we will remain a shell company, we do not know how long we can remain this way, but we have several options.” He did not categorically outline the “options.”

On the other hand, BDO has not yet finished discussion with the BSP regarding the acquisition of the assets and liabilities of EIB. Since it is not an outright acquisition nor is it a consolidation, incentives given to the acquiring bank may not apply.

“There are still certain conditions that we have to settle,” BDO president and chief executive officer Nestor Tan told The STAR.

Assuming all goes well, BDO will get 50 operational branches, 35 of which are mostly located in the Metro Manila area. The universal bank of the SM Group is already operating more than 700 branches nationwide, with another 30 still to be opened in the next two to three years. It likewise operates 1,200 automated teller machines.

Earlier, EIB will be disposing of its holdings in Banclife Insurance Co. Inc. to Eusebio H. Tanco. “It is still undergoing due diligence,” they said.

It sold EIB Savings Bank to a group led by Francisco Dizon for a princely amount of P7 million, although it is still awaiting approval from PDIC.

EIB however failed to sell Exportbank Plaza after The Bangko Sentral ng Pilipinas (BSP) and PDIC disapproved its proposed sale to ArthaLand Corp.

Gonzales said that they hope that all the transactions would be finish within 2010, as this will have a direct bearing on the direction of EIB.