mergers and acquisitions

UnionBank buys Citi Philippines’ consumer banking business for P55 billion

Ralf Rivas
UnionBank buys Citi Philippines’ consumer banking business for P55 billion
The transaction with Citi is expected to close in the second half of 2022 and will be funded mainly by a stock rights offering

MANILA, Philippines – UnionBank of the Philippines is set to acquire Citi’s consumer banking business in the Philippines for P55 billion (around $1.1 billion), edging out larger banks that had drawn bids.

On Thursday, December 23, UnionBank said it will pay in cash for Citi’s assets, plus a premium of P45.3 billion. The required equity value for the transaction is P9.7 billion.

The Aboitiz-led bank will fund the transaction through internal sources, as well as a stock rights offering (SRO) amounting to P40 billion.

Its key shareholders, namely Aboitiz Equity Ventures, Insular Life Assurance, and Social Security System, are said to be committed to fully subscribing to their respective allocations, as well as to any SRO shares not taken up by other shareholders.

“Citibank Philippines has a great, profitable and well-run retail portfolio. It has the 3rd largest credit card franchise and is a pre-eminent wealth management provider in the Philippines. We look forward to this game-changing opportunity to leapfrog our credit card business and significantly expand our banking business in the higher-end segment of the consumer market,” said Edwin Bautista, president and chief executive officer (CEO) of UnionBank.

UnionBank is set to acquire Citi’s real estate interests, such as Citibank Square in Eastwood, three full-service bank branches, five wealth centers, and two bank branch lites.

Citi is the largest foreign bank in the Philippines with total assets of P89.5 billion, gross loans of P59.7 billion, and a customer base of close to 1 million, as of June 2021.

There are around 1,750 Citi employees, including senior management, who are expected to join UnionBank.

“We are looking forward to welcoming all employees to the UnionBank family. With the strong cultural similarities between the organizations, we believe Citi’s employees will feel at home at UnionBank,” said Erramon Aboitiz, UnionBank chairman.

The emergence of UnionBank as the likely buyer came as a surprise, since bigger banks like BDO, Metrobank, and Bank of the Philippine Islands had also drawn bids for Citi’s assets. UnionBank was selected by Citi following an “extensive and competitive auction process.”

The transaction with Citi is expected to close in the second half of 2022.

Peter Babej, Citi Asia Pacific CEO said, “This transaction represents a positive outcome for our clients, our colleagues and our firm…. Citi will continue to serve institutional clients in the Philippines and across Asia Pacific as we have for over a century. We are very pleased with today’s announcement, and we will use the capital generated to invest in our strategic priorities.”

Morgan Stanley is acting as exclusive international financial advisor to UnionBank in relation to the transaction. Milbank LLP and Romulo Mabanta Buenaventura Sayoc & de los Angeles are acting as legal advisors to UnionBank. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.