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Asia United Bank to take over banking operations of Asiatrust

/ 06:31 PM February 16, 2012

MANILA, Philippines—Medium-sized Asia United Bank of the Rebisco group has inked a deal to take over the banking operations of niche thrift banking player Asiatrust Development Bank after two years of negotiations.

Under the transaction, which is targeted to be completed within the first half of this year, AUB will acquire the banking assets and assume the banking liabilities of Asiatrust without effecting any change in the latter’s shareholder base.  The trust assets of Asiatrust, estimated by well-placed banking sources at about P250 million, will be excluded from this takeover deal.

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The acquisition will add about P6 billion to the balance sheet of AUB, which currently has P52 billion in resources. The transaction will contribute 28 additional branches to AUB’s existing network of 74 branches.

Out of Asiatrust’s total branches, 18 are within Metro Manila, still the biggest market for financial services in the country.

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“The acquisition of the Asiatrust banking business will allow us to deliver the AUB brand of service commitment and excellence to more clients within a short period of time,” AUB president Abraham Co said in a joint AUB-Asiatrust press statement issued late Wednesday.

“We are happy to entrust our customers to a strong, highly profitable and growing bank, which has a proven track record in operational integration and is at the forefront of enhancing customer service experience.  We will work closely with AUB towards a smooth transition,” Asiatrust vice chair Roland Garcia said.

Asiatrust president Dionisio Ong added that the integration of Asiatrust into AUB would allow Asiatrust’s customers to access a wider distribution network and more product offerings.

ING Bank NV acted as financial adviser to Asiatrust on this transaction.

Banking sources privy to the deal said this was structured this way – via the purchase of assets rather than shares – so that Asiatrust’s shareholders would “still be left with something” after AUB’s takeover while AUB would avoid taking on additional contingent liabilities.

The controlling shareholder group of Asiatrust is the Garcia family but this thrift bank also has the Social Security System and Asian Development Bank among its minority investors, respectively accounting for 19.13 percent and 7.55 percent of total shares based on the bank’s latest report on its top 100 shareholders.

About 32 percent of the bank’s shares are held and traded by the public but trading on shares of Asiatrust have been suspended at the Philippine Stock Exchange since November 2010 when it entered into advanced negotiations with investors.

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With this transaction, Asiatrust shareholders can keep the publicly listed holding company but they will be required to give up its banking license.  However, they can still unlock some values out of the shell company by selling it to new investors that are searching for a backdoor listing ticket on the local stock exchange, banking sources said.

Apart from AUB, tycoon Henry Sy’s Banco de Oro Unibank had also looked at the possibility of taking over Asiatrust.  BDO, to date, is still working on its acquisition of Export and Industry Bank through a similar framework of asset rather than stock transfer.

The exclusion from the deal of Asiatrust’s P250-million trust business which consists of off-balance-sheet items, is likewise seen allowing AUB to avoid taking on contingent liabilities.

“(There are) too many contingent issues like they are handling money of the Legacy group of (Celso) De Los Angeles,” said one banking source privy to the transaction.

AUB had been in on-and-off talks to take over Asiatrust since 2010.  A breakthrough was reached after the government agreed to provide incentives to Asiatrust’s white knight. Industry sources said the Bangko Sentral ng Pilipinas would provide some cash advance to smoothen the turnover while talks were still underway for the state-owned Philippine Deposit Insurance Corp. to provide some financial support.

AUB is a small but highly profitable commercial bank that seeks to scale up its operations through this acquisition, which in turn is backed by the financial muscle of its principal shareholders led by biscuit and real estate magnate Jacinto “Jack” Ng of Republic Biscuit Corp.

The bank ranks 28th out of the country’s 38 commercial banks based on the ranking by the Bangko Sentral ng Pilipinas as of end-September 2011.

Ng also owns the hotel/service apartment property managed by Oakwood in Ortigas.  He is among the 40 richest men in the country based on Forbes’ ranking last year with an estimated net worth of $115 million.

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TAGS: Asia United Bank, Asiatrust Development Bank, Rebisco group
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