The Merging and Acquisition of Banco

De Oro and Equitable PCI Bank

The Banking Industry in todays era has

been experiencing rapid growth and
changes.
Many financial institutions feel the urge
of merging and acquiring as a way of
competing with a growing array of
strong financial service providers such
as banks, insurance companies,
mortgage companies, etc.

BDO, known as Acme Savings Bank,

was acquired by the SM Group in 1976.
Until 5 August 1996, when it was
granted full universal bank status, the
Banks main business was providing
traditional loan and deposit banking
services to the middle-market
segment, including corporate suppliers
of SM.

BDO listed its shares in the Philippine

Stock Exchange (PSE) on 21 May 2002.
On June 15, 2001, BDO merged with
Dao Heng Bank's Philippine subsidiary,
with BDO as the surviving entity.
As of 29 December 2005, Banco de Oro
ranked 5th in terms of resources and
loans, 6th interms ofdeposits, and 8th
in terms of capital among the 41
commercial banks in the industry.

Equitable PCI Bank is a commercial bank with an

expanded banking license.

It is the third largest private domestic bank in the

country in terms of resources, capital, deposits,
and loans.

Offering traditional and innovative deposit products

and services, cash management, international
banking, commercial and corporate banking,
money market, trust and treasury services, the
Bank caters to the needs of corporate, middle
market, and retail clients.

Combining the individual strengths of

Equitable Bank and PCI Bank, the merger in
1999 created a strong presence insignificant
market segments particularly the corporate
and Filipino-Chinese middle market.

Moreover, Equitable PCI Banks extensive

distribution network provides the critical
mass to further fortify the Banks position in
the consumer/retail sector as it presents
increased opportunities for cross-selling
other retail products.

Equitable PCI Bank enjoys many advantages

as the third largest private domestic bank in
the Philippines.

The Bank has had a long history of financial

strength and stability and holds leading
positions in key business segments.

It has a strong position in the middle market

and in the corporate market. It enjoys a large
presence, wide customer base, and extensive
distribution network. The Bank has a base of
diversified well-established financial services
businesses, which further bolster its position

In credit cards, Equitable Card Network

dominates the local credit card industry
as merchant acquirer, and third party
processor.
This provides good scope for the Bank
to increase its retail lending.
PCI Leasing and Finance is one of the
most profitable finance companies with
a high capital base and wide reach.

PCI Capital Corporation is well

recognized for being a dominant player
in investment banking
Capitalizing on its size and large
customer base, the Bank also
continues to invest in technology and is
able to take advantage of economies of
scale.

EPCI BEFORE MERGING =

0.179150%

BDO BEFORE MERGING =

1.088067%

BDO AFTER MERGING = 0.707700%

(EPCI AS OF 2005) = 0.8183%

(BDO AS OF 2005) = 2.9273%

(BDO AS OF 2009) = 3.5496%

A plan by the SM Group of Companies

and Banco de Oro Universal Bank to
merge with Equitable PCI Bank

Last November 2006 their respective

Board of Directors passed resolutions
approving a plan to merge the two
companies

To serve its customers better and more

efficiently than either institution alone

To invest in the most up-to-date

technology and develop more
innovative products which will benefit
both retail and corporate customers

Will be better able to upgrade its risk

management and IT systems in order
to address Basel II requirements.

A merger with EPCI would transform

BDO into a dominant industry player,
possessing market leadership and
operational scale while enhancing
shareholder value through a potential
re-rating in the share price and
reduced funding cost.

Osmena v. Social Security

Commission, G.R. No. 165272,
September 13, 2007
On August 5, 2005, Banco de Oro
andSM Investments Corporation,
another member of the SM Group,
acquired 24.76% of Equitable PCI
shares from the Go family, the family
that founded Equitable PCI.

On January 6, 2006, Banco de Oro

offered to buy the rest of Equitable PCI
for 41.3 billion pesos through a share
swap option, with Banco de Oro as the
surviving entity.Under the deal, every
one Equitable PCI share would be
swapped for 1.6 Banco de Oro shares
or, in a second option, an independent
accounting company would determine
theswap ratio on the book values of
both banks under International
Accounting Standards.

On November 6, the respective boards of Banco

de Oro and Equitable PCI Bank agreed to the
merger of both banks through a modified stock
swap deal.Instead of the original 1.6 shares
Banco de Oro would swap for, it would swap 1.8
shares for every Equitable PCI share
On December 27, 2006, Banco de Oro
shareholders approved the merger with
Equitable PCI Bank.Equitable PCI Bank
shareholders also approved the merger the
same day.In order for the merger to take effect,
approval from both the Bangko Sentral and the
Securities and Exchange Commission is
required, which was obtained in early 2007.

Regulatory approval from the Bangko

Sentral was granted on April 25, 2007.
On May 31, 2007, trading of Banco de Oro
and Equitable PCI Bank shares were
suspended,with Equitable PCI Bank
shares being delisted from the PSE
Equitable PCI Bank branches are in the
process of becoming Banco de Oro
branches. The legal name of the bank
remained Banco de Oro-EPCI, Inc. until
February 2008, when it was finally named
Banco de Oro Unibank, Inc.

PROS
- Banco de Oro would move up into large
capitalized company status, defined as a
company whose capital stands at a minimum
of $700 million. The merger of both banks
would result in the merged company having
a market capitalization of two billion dollars.
- The new Banco de Oro would have a total of
685 branches and a wide-reaching ATM
network. Thus, a wider convenience to both
BDO and Equitable customers.

CONS
- Transition could mostly result with the
conversion of ATMs: Equitable PCI Fastellers
are linked to MegaLink while Banco de Oro
Smartellers are linked to Expressnet. Also,
Equitable PCI ATM cards are linked to Visa
Electron and/or PLUS while Banco de Oro ATM
cards are either local or, in the case of the
new BDO International ATM Card, linked to
MasterCard (branded as MasterCard
Electronic), Maestro and Cirrus.
- It would trigger a wave of mergers and
acquisitions that could result in an oligopoly,
with only few competitors

The proposed merger of BDO and EPCI

will create a bigger and stronger
institution which will be among the
leaders in the industry. It also
continues the process of consolidation,
which we believe is positive for the
Philippine banking system.
-Governor Amando Tetangco, Bangko Sentral ng
Pilipinas

The merger of BDO and EPCI raises

the bar of competition for the
Philippine banking industry. It is good
for financial stability and good for
customer service.
-Deputy Governor Nestor Espinilla , Bangko Sentral ng
Pilipinas

has approved the merger of Banco de

Oro Universal Bank and Equitable PCI
Bank with BDO
renamed as Banco de Oro-EPCI, Inc

698 branches
1,171 Automated Teller Machines
(ATMs) nationwide
third largest in the country in terms of
branch network.

In 2001, the bank acquired the

Philippine subsidiary of Dao Heng
Bank, growing its branch network by
12.
In April 2005, the bank further
expanded by acquiring branches of
United Overseas Bank .

Bank (as of 2005)

Gross Revenues (P million)

1.

Metropolitan Bank & Trust Co.

39,731

2.

Bank of the Philippine

37684

3.

Equitable PCI Bank, Inc.

26,042

4.

Land Bank of the

24,565

5.

Banco De Oro

22,225

6.

Philippine National Bank

18,380

7.

Development Bank of the

18,271

8.

China Banking Corp.

14,435

9.

Rizal Commercial Banking Corp.

14,086

10.

Union Bank of the

11,717

Assets
1.

Banco de Oro (BDO)

Php634.3 billion

1.

Metrobank

Php585.8 billion

1.

Bank of the Philippine (BPI)

Php541.2 billion

1.

Landbank of the

Php333.6 billion

1.

Philippine National Bank (PNB)

Php201.2 billion

1.

Rizal Commercial Banking Corp. (RCBC)

Php196.4 billion

1.

Chinabank

Php173.9 billion

1.

Union Bank of the

Php162.0 billion

1.

Allied Bank

Php139.8 billion

1.

Citibank-

Php187.8 billion

Deposits
1.

Banco de Oro (BDO)

Php808.0 billion

1.

Metrobank

Php758.5 billion

1.

Bank of the Philippine (BPI)

Php658.4 billion

1.

Landbank of the

Php434.0 billion

1.

Development Bank of the (DBP)

Php290.9 billion

1.

Philippine National Bank (PNB)

Php276.8 billion

1.

Rizal Commercial Banking Corp. (RCBC)

PhP270.2 billion

1.

Unionbank of the

Php208.2 billion

1.

Chinabank

Php207.3 billion

1.

Citibank-

Php187.8 billion

CATAJAN, Dianne Isabelle

ESPERA, Hazel
FABIAN, Paulo Carlo
GUCE, Joanna Melissa
LOZADA, Marie Fe Giriel
MADRIAGA, Ronellyn
MANALILI, Erika