New PNB-Allied Bank merger terms ready

The Lucio Tan group has drawn up new terms for the Philippine National Bank-Allied Bank Corp. merger via a share-swap arrangement, which is expected to finally happen in 2012, to reflect improvements in the financial position of PNB since the original blueprint was announced three years ago.

The respective boards of PNB and Allied Bank announced on Friday a resolution approving the revised merger plan, which will be endorsed to shareholders for final ratification in the first half of next year.

Under the proposed amended terms, PNB will still be the surviving entity and the merged bank will adopt its name.

PNB will issue to Allied Bank shareholders 130 PNB shares for every Allied Bank common share and 22.763 PNB shares for every Allied Bank preferred share. PNB shares will be issued at P70 per share.

The previous merger plan approved in 2008 called for the swap of 140 PNB shares per Allied Bank common share and 30.73 PNB shares per Allied Bank preferred share, with the new PNB shares to be issued at a price of P55 per share.

Eagle Equities president Joseph Roxas said there was a need to reflect the better financial position of PNB now compared to what it was three years ago when the original deal was drafted. “Many changes have happened since then,” he said.

Roxas said the latest figure was not necessarily based on market valuation, noting that PNB shares closed at P52 per share on Friday.

“The significance lies in the pricing of PNB shares. The bank priced its shares at a 27 percent premium to the initial valuation in April 2008. This means the dilution impact of the share-swap by PNB to acquire Allied Bank will be less relative to the time when the merger was first disclosed. The higher valuation, I believe, stems from the significant improvement in the profitability of PNB since 2008,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.

Since the announcement of the merger plan in 2008, both banks have made significant progress on synchronization of information technology systems; alignment of products and processes; human resource development; branch rationalization, and expansion. But because the merger will be done through a share swap, valuations have changed from the time the plan of merger was announced.

The union is seen building a stronger platform to offer a wide range of personal and corporate banking products and services. It will create the country’s fourth largest private domestic bank with a combined distribution network of 646 branches and total assets of P514 billion as of end-September. It will also have the largest international footprint across Asia Pacific, Europe, the Middle East and North America.

“The merger will mark a special milestone for our bank … In creating the country’s fourth largest private bank, we will be in a position to improve customer experience and lead industry innovation,” PNB president Carlos Pedrosa said.