Taiwan insurer buys 20% of RCBC for P18B

RCBC Plaza. INQUIRER FILE PHOTO

MANILA, Philippines–Cathay Life Insurance Co. Ltd., Taiwan’s largest life insurer, is buying a 20-percent stake in Yuchengco-led Rizal Commercial Banking Corp. for P17.92 billion, boosting the local bank’s capital build-up program.

In a disclosure to the Philippine Stock Exchange on Tuesday, RCBC also said it was shelving its planned P4.5-billion stock rights offering as its board had selected Cathay Life as the “preferred bidder” for a mix of primary and secondary shares in RCBC.

The Taiwanese insurer is buying about 280 million shares of RCBC at P64 a share, of which 124.34 million will be primary common shares. This primary portion will raise P7.96 billion in fresh capital, boosting RCBC’s common equity tier 1 capital under Basel 3 framework from 10.9 percent to P13.5 percent.

Basel 3 introduces a complex package of reforms designed to improve the ability of banks to absorb losses. It also extends the coverage of financial risks and puts in place stronger firewalls against periods of stress.

RCBC is now working on a definitive agreement with Cathay Life, a wholly owned subsidiary of Cathay Financial Holding Co. Ltd., which is the largest publicly listed financial holding company in Taiwan, and a leading provider of financial products with a 50-year history.

Out of this relationship with Cathay Financial, RCBC expects to derive significant value-add in the following areas: capital, consumer banking, wealth management, digital banking, corporate relationships across Cathay Financial’s network across Taiwan, greater China and Southeast Asian presence and cross-selling opportunities.

On the other hand, the secondary common shares will be sold by the following: Hexagon Investments BV advised by CVC Asia Pacific Ltd. (118.935 million) and International Finance Corp. (36.724 million).

After the transaction, Hexagon—which invested in RCBC in 2011 at P29 a share—will retain only 1.45 percent while IFC will keep 7.71 percent.–Doris C. Dumlao