CIMB-San Miguel deal paves way for Philippine bank takeover

The acquisition will be made by CIMB Bank at a price of 181.25 pesos per share. The total consideration for the acquisition of about 12.203 billion pesos (Bt8.96 billion) will be settled in cash. BoC was valued at a price to book of 1.14 times as of December 31, but upon full alignment with CIMB Group’s accounting and provisioning policies, the effective price to book is expected to be about 1.30 times. 

In conjunction with the acquisition, CIMB Bank has also entered a collaboration agreement with SMC for the continued support of the SMC ecosystem to BoC. This is to build and foster closer collaboration between CIMB Group and SMC Group. The SMC Retirement Plan will remain the largest minority shareholder of BoC at 27 per cent.

“As an Asean universal bank, this extension to the Philippines is a very natural one. I believe we are entering this market at the right time, with the right deal and right partner,” said Nazir Razak, chief executive of CIMB Group. 

Incorporated in December 1963, BoC is the 16th-largest bank in the Philippines in terms of total assets. It offers a wide range of banking and other financial products and services including traditional deposit products, corporate banking, consumer banking, treasury, asset management, trust services, trade and credit-card services targeting consumers, small and medium-sized enterprises and corporate customers. BoC currently operates 122 branches and 300 automated teller machines throughout the Philippines.

“BoC is small today but it can grow quickly with its low loan-to-deposit base and high capital ratios. BoC also strengthens CIMB Group’s overall regional value proposition of facilitating intra-Asean investments and trade as well as travel,” Nazir said. “With this acquisition, our retail network will increase to 1,239 full branches, reaffirming our credential of having Asean’s largest branch footprint.”

He added that CIMB Group was optimistic about the long-term prospects of the Philippine economy, with the fifth-largest gross domestic product in Asean and the second-largest population. 

“The average annual real GDP growth in the Philippines has been approximately 4.9 per cent for the past 10 years. This, together with the stabilising political situation and pro-business administration, increasing trade links with Asean countries and an under-penetrated banking market, means that the Philippines has the potential of becoming very important to us,” Nazir said.

On the group’s business plans, he said: “On the wholesale side, we see the immediate potential of delivering banking and capital-markets solutions to corporates. The consumer segment will take us a little more time and investment overall, but we can get our remittance proposition up and running quickly. The most exciting part, though, is the access to the SMC ecosystem, which is a huge community of SMC entities as well as suppliers and partners.”

The proposed acquisition will not have any material effect on CIMB Group Holdings’ consolidated net assets and earnings in respect of the financial year ending 2012 and will not have any effect on its share capital.