The Bank of Tokyo-Mitsubishi UFJ Ltd., the largest bank in Japan, on Thursday sealed an agreement to acquire 20 percent of Security Bank Corp. for $782 million or P36.9 billion.
Security Bank chairman Alberto Villarosa said the transaction represented the largest investment by a foreign financial institution in the Philippines, after the government passed Republic Act No. 10641, allowing the “full entry” of foreign banks into the country.
“This is a historic event for Security Bank and the Philippine financial market.. This [transaction] is expected to be closed at the second quarter [this year]. This is the largest equity investment in the country’s financial system by a foreign institution,” Villarosa said during the signing ceremony at Makati Shangri-la Hotel.
The deal topped the Philippine investment of Cathay Life Insurance Corp. of Taiwan, which infused P17.9 billion for a 20-percent stake in Rizal Commercial Banking Corp. in April last year.
BTMU is a member of Mitsubishi UFJ Financial Group Inc., one of the world’s leading financial groups with total assets of $2.4 trillion as of March 31, 2015.
Under the strategic partnership agreement, BTMU would acquire newly-issued primary shares of Security Bank consisting of 150.7 million common shares at P245 apiece and 200 million preferred shares at P0.10 per share for a total of P36.9 billion, representing 20-percent stake in the bank.
The buying price represented an 81-percent premium on Security Bank’s Wednesday closing price of P135. The stock jumped 6.7 percent to close at P44 Thursday, following the announcement.
“People say that it’s expensive, but we believe this is the right price,” Go Watanabe, the managing executive officer and chief executive for Asia- Oceania at MUFG’s main lending unit, said. “We believe this price is fair, calculating the intrinsic or future value of the bank.”
Security Bank president Alfonso Salcedo Jr. said with the capital infusion, Security Bank would become the fifth largest bank in the Philippines. The infusion will increase Security Bank’s shareholder capital from P52.4 billion as of September 2015 to P89.3 billion on a pro-forma post transaction basis.
Villarosa said the Dy family, which had been the bank’s majority shareholders for years, would remain the controlling shareholder of the bank. He said the additional capital infusion from BTMU would be largely allocated to pursue the bank’s growth and strategies. Total foreign ownership of Security Bank climbed to 35 percent, still below the 40-percent limit under the law.
“This is a testament to Security Bank’s reputation. We welcome the entry of BTMU as a shareholder and business partner. This partnership is an appropriate fit for Security Bank to deliver our promise of better banking,” Villarosa said.
Watanabe said the Japanese group’s partnership with Security Bank was a testament to its commitment to grow its business in the Philippines.
“It is a good start for 2016… We look forward to growing our presence in the Philippines with support and collaboration with Security Bank,” Watanabe said. He said they chose to invest in the Philippines because it was one of the potential markets in Asian region.
“Asean market is our second core market after Japan. So we would like to expand our business here, so Asean is very important,” Watanabe said, adding that growth outlook for the Philippines was bright considering its sustained strong GDP and a huge number of young and productive population.
“We found the right partner in the Philippines… Security Bank is the right partner and [this is the] right time. That is our belief,” Watanabe said.
Watanabe said BTMU had no plan to increase the 20-percent stake in Security Bank at the moment, “but if the opportunity comes, we will think about it. Right now, we are comfortable with the 20 percent.”
Salcedo said with the transaction, BTMU would appoint two representatives to the SBC’s board of directors, which is currently composed of 11 individuals.
“We see the completion of this transaction in the first half of 2016, subject to regulatory approvals in the Philippines,” Salcedo said.
Salcedo said Security Bank would now be looking at expanding its nationwide coverage by putting up a significant number of branches in the next five years.
“We have 262 branches right now. In the next five years, we are eyeing a total of 500 to 600 branches. We are open to the idea of putting up more branches when opportunities arise,” Salcedo said.
COMMENT DISCLAIMER: Reader comments posted on this Web site are not in any way endorsed by Manila Standard. Comments are views by manilastandard.net readers who exercise their right to free expression and they do not necessarily represent or reflect the position or viewpoint of manilastandard.net. While reserving this publication’s right to delete comments that are deemed offensive, indecent or inconsistent with Manila Standard editorial standards, Manila Standard may not be held liable for any false information posted by readers in this comments section.