Malaysian banking giant CIMB’s bid to acquire Bank of Commerce has hit a snag and seller San Miguel Corp. is willing to walk away from the P12.2-billion deal if this is not resolved soon.
In a week or so, the local conglomerate would know whether to close the transaction or break off the engagement with CIMB, SMC president Ramon S. Ang told the Inquirer.
“I think we’re in the last stage,” Ang said, saying it would likely take a week more to determine the outcome. “If this deal does not push through, then I will go run the bank. And if I will be the one to run it, I will increase its capital by $2 billion.”
Nine months ago, CIMB and SMC agreed for the Malaysian bank to buy a 60-percent stake in Bank of Commerce, where the local conglomerate held an 84-percent stake. Industry sources said constitutional restrictions on foreign ownership of real estate in the country became a key stumbling block to the closing of the deal.
The sources said that since part of the bank’s assets were in real estate, including the bank premises and some foreclosed assets, some assets had to be spun off into a realty company, which could not be controlled by a foreign entity like CIMB.
The sources said the delay had nothing to do with the valuation or even the quality of assets but was all due to the complications arising from CIMB’s lack of legal capability to absorb real estate assets.
Ang confirmed that the real estate issue was the source of delay. “They want us to be part of the realty corporation,” Ang said, noting that this was not part of SMC’s assumption when it agreed to the deal.
Ang said SMC’s position was a “take-it-or-leave-it,” saying the conglomerate would be ready to keep Bank of Commerce in its portfolio.
Another source involved in the transactions said there was still a chance that the deal could push through, with the crucial meetings between SMC and the Malaysian group indeed happening within the coming week.
“It’s not dead. It’s just in ICU (intensive care unit). There’s still some pulse to it,” the source said.
CIMB, which has regional expansion plans across Southeast Asia, wants to acquire Bank of Commerce to break into the Philippine market.
Incorporated in December 1963, Bank of Commerce is the 16th largest bank in the Philippines with total assets of P96.3 billion. It operates 122 branches and 300 ATMs throughout the Philippines.
CIMB Bank had agreed to buy into the bank at a price of P181.25 a share, which valued the bank at 1.14 times the bank’s book value per share as of end-2011. Upon full alignment with the CIMB group’s accounting and provisioning policies, the effective price to book value was expected to be about 1.3x. Meanwhile, most listed banks in the country are now trading at more than twice their book value.