Significant business combinations
Two recent events in the business community augur well for the national economy.
The first event was the P150-billion personal investment by San Miguel Corp. (SMC) top honcho Ramon Ang in Metro Pacific Investments Corp. (MPIC), which is headed by business tycoon Manuel Pangilinan.
That investment entitles Ang to a seat in MPIC’s board of directors.
Recall that some years back, SMC and MPIC competed in the bidding for some infrastructure projects of the government. Outside of business, they also compete in the country’s professional basketball league through their sponsorship of several teams.
Because of that competition, Ang and Pangilinan had been described by some journalists as “frenemies” or people who act as friends but are in reality rivals.
To their credit, however, unlike some politicians, they do not throw brickbats at each other, at least not in public.
Their newfound business relationship may be described as an affirmation of the saying “there are no permanent enemies or friends, only permanent interests.” And the interests they individually control and represent are simply enormous.
The second event was the final takeover by the Ayala-led Bank of the Philippine Islands (BPI) of Robinsons Bank, which is owned by the Gokongwei family.
The stocks-for-assets buyout, which was worth over P32 billion, has made the Gokongweis the second largest stockholder of BPI after the Ayalas. With the merger, BPI, whose roots date back to the Spanish colonial period, would be the third-biggest bank in the country in terms of assets.
The Bangko Sentral ng Pilipinas (BSP) couldn’t be any happier about the merger because it conforms to its policy of encouraging bank consolidations and it did not have to offer incentives to the two banks to merge.
Although Ang’s investment in MPIC was made in his personal capacity (or using his own funds), his action is a virtual vote of confidence on MPIC’s financial viability.
A billionaire many times over that Ang is, P150 billion is clearly not something for him to leave to chance.
In the long run, Ang’s action may encourage SMC, as a company, or any of its affiliates and subsidiaries, to do something similar or enter into joint ventures with MPIC.
The combination of the two companies’ financial muscle and business expertise, plus their outstanding international credit standing, could create a synergy that would be unprecedented in the country.
Working together, SMC and MPIC can go toe-to-toe with cash-rich foreign companies in bidding or offering to construct and operate infrastructure projects in the Philippines, or entering into private-public partnership agreements that require billions, or even trillions, of pesos in funds.
Should they need additional financial resources for those projects, they can easily tap the international financial market without adding to the already heavy national debt.
With regard to the BPI-Robinsons Bank merger, its most significant benefit to the economy is that the increase in BPI’s deposit base would enable it to extend more loans to prime borrowers, or make available financing to startups and small- and medium-scale enterprises (SMEs).
Lending to startups and SMEs is not exactly an attractive proposition for some banks. The lack of satisfactory collateral or the risk of loan default has been a major disincentive to opening credit lines to those businesses.
With no properties to put up as security or unable to comply with strict loan regulations, they are forced to either borrow from informal sources at usurious rates or not go beyond what their capital allows them to operate.
The additional elbow room provided by the merger gives BPI the opportunity to expand its lending activities without breaching the prudential requirements of the BSP.
Judging from these events, it looks like the present business climate is a lot better and more encouraging than it was a year ago. INQ
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