BDO, AUB keen on acquiring SMC stake in Bank of Commerce

MANILA, Philippines–Top lender Banco de Oro Unibank and the Rebisco group’s banking arm Asia United Bank have expressed interest to acquire Bank of Commerce (BOC) from conglomerate San Miguel Corp.

After the collapse of a buyout deal with Malaysian banking giant CIMB a year ago, SMC earlier mandated American banking giant Citigroup to initiate a transaction process to find a new strategic investor for BOC.

Industry sources privy to the discussions said BDO was interested in acquiring BOC’s branches.

In the case of AUB—which is closer in size to BOC—it is in talks for a potential merger, the sources added.

Aside from BDO and AUB, there are two other international financial institutions that earlier expressed interest in BOC, one of which is Mizuho Financial Group of Japan.

With the Philippines becoming more attractive to Japanese investors, some Japanese banks have expressed interest in setting up shop in the country.

The BOC transaction is being conducted through an individual negotiation process, rather than an auction with pre-set terms and conditions.

As such, each bank has different proposals for BOC.

A few years ago, both BDO and AUB vied for a controlling stake in Asiatrust Development Bank.

AUB ended up acquiring the assets and liabilities of Asiatrust—excluding trust operations—in 2012.

As of end-September last year, BOC had P129.83 billion in assets, making it the country’s 15th largest bank in terms of assets.

BDO is led by the SM Investments group of tycoon Henry Sy, the country’s wealthiest man.  Since the turn of the century, BDO has embarked on a series of acquisitions to become the country’s largest bank in terms of assets.

As of end-September 2014, total resources amounted to P1.7 trillion.

AUB, for its part, has about P118 billion in resources.

It seeks to grow through organic expansion as well as acquisitions.

The implementation of Basel 3 capital adequacy framework starting this year is seen prompting mergers and acquisitions in the country.

Based 3 introduced a complex package of reforms designed to improve the ability of banks to absorb losses.

It also extended the coverage of financial risks and put in place stronger firewalls against periods of stress.

In 2013, SMC entered into a P12.2-billion deal to sell a 60-percent stake in BOC to CIMB, but the deal was called off due to unresolved issues on real estate ownership.

One snag had to do with land issues. CIMB needed to spin off a partner realty company to handle the property assets of Bank of Commerce since the Philippine Constitution forbids 100 percent foreign land ownership. CIMB reportedly wanted San Miguel to co-own the realty company but negotiations in this regard were apparently rocky.

The deal was complicated by the constitutional limit (40 percent) on foreign ownership of real estate in the country.