Bank of Commerce now in hands of Malaysia’s CIMB

MANILA, Philippines [UPDATED] – Diversified conglomerate San Miguel Corp. on Tuesday, May 8, signed a deal with Malaysia’s second-largest lender, CIMB Group, to sell a portion of its stake in unlisted unit Bank of Commerce.

The parties entered into a conditional share purchase agreement, giving CIMB 60% of medium-sized BoC for P12.2 billion (RM881 million), CIMB said in a statement posted on its website.

With the sale, San Miguel’s stake in BoC — held by its retirement fund and property development unit — will go down to 27%.

“San Miguel Corporation Retirement Plan will remain the largest minority shareholder of BoC,” CIMB said.

BoC is the Philippines’ 16th largest bank in terms of assets. It currently operates 122 branches and 300 automated teller machines throughout the country.

Apart from the share purchase, CIMB said it also entered into a “collaboration agreement” with San Miguel for the latter’s continued support in banking operations. “This is to build and foster closer work collaborations between CIMB and San Miguel.”

The deal marks CIMB’s entry into the Philippine banking industry. It also allows San Miguel to focus on new, heavy industries such as power and infrastructure, analysts earlier said. 

CIMB portfolio

“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 Dato’ Sri Nazir Razak, CEO of CIMB.

The Malaysian bank has been on an acquisition binge in a bid to maintain its position as a dominant player in Southeast Asia. Last month, it acquired some of the Asian units of Royal Bank of Scotland Plc. It said BoC’s addition to its portfolio “strengthens” its overall value proposition of facilitating investments and trade as well as travel in the region.

“Our retail network will increase to 1,239 full branches, reaffirming our credential of having ASEAN’s largest branch footprint,” Nazir noted.

CIMB’s entry in BoC is also seen to help the local bank be at par with major players in the country.

CIMB has about $98 billion (RM300.2 billion or P4.1 trillion) in assets, more than the combined assets of the top three Philippine banks.

“BoC is small today but it can grow quickly with its low loan to deposit base and high capital ratios,” Nazir said.

The CIMB chief said the deal with San Miguel signals its confidence in the Philippine economy, its prospects and the benefits it will get from the government’s anti-corruption efforts.

“The average annual real GDP growth in the Philippines has been approximately 4.9% 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.”

Fresh funds for San Miguel 

The deal, meanwhile, is also strategic for diversifying conglomerate San Miguel.

It gives the company the opportunity to focus on new businesses, not to mention, fresh capital to fund these.

CIMB said in its statement it will pay San Miguel P12.2 billion cash for the BoC stake.

San Miguel acquired control of BoC in 2009, two years after it announced it was going into high-growth, high-yielding sectors like energy, mining and utilities. To jump-start its diversification in 2007, San Miguel went on a sell-off spree, unloading its holdings in soft drinks company Coca-Cola, Australian dairy and juice producer National Foods and other assets to raise money.

Recently, San Miguel signed an agreement giving it substantial stake in Philippine Airlines, marking its foray into the airlines sector. – Rappler.com