LAND BANK of the Philippines (Landbank) will start making offers to shareholders of the country’s fixed-income exchange this week, with the state lender hoping to sign enough purchase agreements and acquire a majority stake within a month.
Landbank President and Chief Executive Officer Alex V. Buenaventura said on Friday that the state-run lender will be reaching out to current shareholders of the Philippine Dealing System Holdings Corp. (PDS) today to make counter-offers for existing shares, amid agreements previously secured by the Philippine Stock Exchange (PSE).
“We will offer starting [this] week so that will be March 5. April 5 will be the deadline to accept the offer,” Mr. Buenaventura told reporters late Friday.
“With respect to the offer period, I said we cannot keep the development of the financial markets waiting,” he added.
“Landbank is serious and we intend to move fast — we plan to lock this deal up in 30 days.”
Last week, Landbank’s board of directors approved a plan to acquire 66.67% of PDS at P360 per share, kicking off a showdown between the biggest state-owned lender and the local bourse operator.
The PDS Group operates trading, clearing and settlement for bonds and foreign exchange, namely the Philippine Dealing & Exchange Corp., the Philippine Depository & Trust Corp., Philippine Securities Settlement Corp.
The PSE initiated steps for the PDS buyout as early as 2013, as it looks to merge the country’s equities and fixed-income bourses.
Since June last year, the PSE has signed share purchase agreements with the Bankers Association of the Philippines (BAP); Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd., giving the PSE a 69.03% total stake in PDS.
The Philippine Competition Commission approved these agreements in November, even as the Securities and Exchange Commission (SEC) initially rejected the PSE-PDS merger in 2016.
Currently, Landbank owns 1.56% of PDS through the BAP, which holds a cumulative 13.26% share for itself and its member-banks.
Landbank intends to buy 4.167 million common shares worth a total of P1.5 billion, with Mr. Buenaventura describing PDS as a “potentially profitable investment” for the bank.
“Having offered something higher than what PSE is offering at P320 — and we are paying in cash unlike PSE’s offer of paying in shares — I think we have a very much more attractive offer,” the bank president added, noting that the funds will be drawn from Landbank’s existing capital.
Landbank booked a P14.05-billion net income in 2017, four percent more than P13.58 billion the preceding year.
The ultimate decision, however, lies in the hands of the SEC as it will determine which buyer can secure the biggest stake in PDS.
The SEC imposes a maximum of 20% industry ownership and five percent individual ownership of an exchange, but may grant exemptions if a bigger control “will not negatively impact on the exchange’s ability to effectively operate in the public interest.”
Mr. Buenaventura said the Landbank has already submitted its request for an exemption from this ownership limit and has made its case before the corporate regulator.
“We presented to them (SEC) our proposal. They said they have to decide to whom to give the regulatory relief — to PSE or to us — because they can only give one regulatory relief,” the Landbank chief said.
Mr. Buenaventura said Landbank’s control of PDS will help aid financial market reforms as the state lender plans to take bond transactions to a wider market via its nationwide branch network, as it envision corporate bonds floated by small- and medium-sized businesses. — Melissa Luz T. Lopez