SMC sells BoC stake to CIMB for P12.2B

Conglomerate San Miguel Corp. has finalized a P12.2-billion deal to sell a controlling stake in Bank of Commerce to Malaysian banking giant CIMB, after resolving property ownership-related snags that had delayed the closing of the deal.

SMC president Ramon S. Ang told reporters after the company’s stockholders’ meeting on Tuesday that the deal was “completely done” as of Monday night, with the official closing expected to take place within 30 days.

The Inquirer earlier reported that Constitutional restrictions on foreign ownership of real estate in the country became a key stumbling block to the closing of the deal. Because part of the bank’s assets are in real estate, including the bank premises and some foreclosed assets, some assets had to be spun off into a realty company which, however, cannot be controlled by a foreign entity like CIMB.

CIMB had wanted SMC to acquire an ownership in such a realty company but the local conglomerate refused. Ang even said that SMC would be willing to walk away from the deal.

But Ang said the agreement was finalized as CIMB had agreed not to force SMC into getting an interest in the realty company.

Industry sources estimated that the interest in the realty company that SMC did not want to absorb was worth $120 million.

It’s unclear how CIMB would absorb this stake, given that the Constitutional restriction remains, but industry sources said part of the option was to find an external buyer for the block.

About 10 months ago, CIMB and SMC forged a deal that would enable the Malaysian bank to buy a 60-percent stake in Bank of Commerce, where the local conglomerate held an 84 percent stake.

CIMB, which has regional expansion plans across Southeast Asia, wants to acquire BoC to break into the Philippine market.

Incorporated in December 1963, Bank of Commerce is the 16th-largest bank in the Philippines with its total assets of P96.3 billion. BoC operates at least 122 branches and 300 ATMs throughout the Philippines.

Based on the agreement announced last year, CIMB Bank had agreed to buy into the bank at a price of P181.25 per share, which valued the bank at 1.14 times the bank’s book value per share as of end-2011.

CIMB, Malaysia’s second-largest bank, has about $98 billion (P4.12 trillion) in assets or bigger than the resources of the top three Philippine banks combined.

For its part, SMC, which gained control of Bank of Commerce in 2009, has been diversifying out of its traditional food and beverage businesses in the last few years.

It has entered the power, oil refinery, tollroad, mining, airport and telecommunication businesses and recently bought a substantial stake in and took management control of flag carrier Philippine Airlines.