Ayala secures 10.4% DBS stake in BPI
The Ayala conglomerate spent P25.6 billion to buy 10.4 percent or about half the stake held by Development Bank of Singapore in local unit Bank of the Philippine Islands.
Following the acquisition, the Ayala group’s stake in the country’s most valuable bank expanded to 44 percent from 33.6 percent, entitling the conglomerate to a higher share of BPI’s earnings.
DBS, which has been a strategic investor in BPI since 1999, decided to trim its stake from 20.3 percent to 9.9 percent. Also, DBS would keep a representative on the board of the local bank.
The Singaporean banking giant is locking up gains from its stake in BPI at a time when the stock market is trading at an all-time high.
This is in line with DBS’ “disciplined capital management,” which is meant to strengthen its capital position ahead of the introduction of Basel 3 capital adequacy requirements in 2013, DBS said in a statement in Singapore.
The DBS shares acquired by the Ayala group consisted of both direct and indirect shares in BPI.
Ayala paid DBS P70 per direct BPI common share. Indirect shares held through Ayala DBS Holdings fetched P265.49 apiece. The direct shares consisted of about 309.28 million common shares in BPI or 8.7 percent of total.
Overall, the deal is valued at about 2.7 times the book value of the BPI shares, and at a 9.8-percent discount to the three-month volume-weighted average price per BPI share.
“DBS has been a strategic investor in BPI for over a decade and it remains an attractive investment. We are pleased that the transaction will allow us to continue being a meaningful shareholder in a capital-efficient manner,” DBS chief executive officer Piyush Gupta said.
For his part, Ayala chair and chief executive officer Jaime Augusto Zobel de Ayala said: “DBS has been, and will continue to be, a valuable strategic partner in the governance and management of BPI. They have been a significant part of many of the bank’s milestones and achievements for over a decade. We look forward to continuing this partnership with them in succeeding years.”
Ayala president and chief operating officer Fernando Zobel de Ayala said this was a “value and earnings accretive acquisition” for Ayala, given the group’s view on the growth trajectory of BPI over the medium term.
“This reflects our confidence in the growth potential of BPI particularly amidst the projected expansion of the Philippine economy over the next few years. As a holding company, we always look for ways to strengthen our portfolio and take advantage of opportunities that will enhance the value of our holdings while also continuing to ensure the stability of the shareholder base in each of our business units,” he said.
Although the cost of raising its stake in BPI did not come cheap, the Ayala group said that the transaction would not affect funding for other key projects.
“Our current financial position and our low gearing level provide more than adequate room for us to invest in new growth areas while also optimizing the value of our existing portfolio,” Ayala’s chief finance officer Delfin Gonzalez said.
As of the end of the first semester of 2012 Ayala had over P23 billion in cash. The conglomerate earlier announced plans to invest around $1 billion over the next five years in greenfield and acquisition deals in the power sector, as well as in transport infrastructure projects under the government’s public-private partnership program.
The conglomerate also recently declared that it would issue P10 billion worth of bonds—the second fund-raising initiative this year after the bond offer last May, which raised P10 billion.
DBS set foot in the Philippines in 1996 when it was given a license to operate a full branch after banking regulators opened up its banking sector to foreign banks.
In 1998, DBS bought into the Bank of Southeast Asia to establish a local commercial bank and renamed this DBS Bank Philippines, whose operations were folded into BPI’s wholly owned subsidiary BPI Family Bank in 2001 after DBS acquired a significant shareholding in BPI that year.
While keeping a minority stake in BPI, the Singaporean bank since then continued to maintain its own team in the Philippines through a representative office that was set up in 2002.
