Tan merges PNB, Allied Bank under P62-B share swap deal

By Ruben Hortelano

05/01/2008

A merger of tycoon Lucio Tan banks Philippine National Bank (PNB) and Allied Banking Corp. (Allied) announced yesterday will create the fourth-largest bank in the country.

The merger will be undertaken under a shares swap, in which PNB will issue 140 shares for every Allied common share and issue PNB shares at P55 each. The deal is to close in the third quarter.

The total value of the merger was computed at P61.9 billion, Mier said.

PNB would be the surviving entity after shareholder and regulatory approvals, officials from the two banks said.

The new bank will have P388 billion in total assets, after Metropolitan Bank & Trust Co. (Metrobank), Banco de Oro-EPCI Inc (BDO-EPCI) and Bank of the Philippine Islands (BPI).

PNB president Omar Byron Mier told reporters the lender will issue 457 million new shares under the swap.

Mier said of the new PNB will be owned 80.7 percent by the Lucio Tan group.

Mier discounted any need for increasing the merged bank’s capital as its capital adequacy ratio, which measures the ability to sustain losses without folding up, stands at 19 percent against a 10-percent regulatory requirement.

Bank profitability was seen to slow down in an initial 18-month post-merger period in which the cost of integration was seen to hit as high as P1.3 billion.

“We plan no other bank acquisition after this. Our goal is to hit return on equity of 15 percent by the second year post merger,” Mier said.

Allied Bank president Rey Maclang said the merger was made possible after the Supreme Court resolved the sequestration issue of the bank last year.

He said the merger will complement the individual strengths of both lenders given that Allied Bank is strong on the Filipino-Chinese community of investors and on the small and medium scale entrepreneur niche.

PNB, on the other hand, is strong not only on the corporate front but also on local government units, government owned or controlled corporations and in the provincial areas.

Mier said both banks’ overseas units, totaling 124 offices, branches and subsidiaries, will be retained.

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