GIC, Ayala buy DBS' Philippine bank stake

PHOTO: GIC, Ayala buy DBS' Philippine bank stake

DBS Bank has sold its remaining stake in the Bank of the Philippine Islands (BPI), to allow Singapore's largest lender to channel more resources to core markets.

But Singapore is retaining an interest in the bank.

The 9.9 per cent stake in BPI has been sold to Singapore's GIC and Philippine conglomerate Ayala Corporation for $850 million in cash.

DBS noted in a statement late on Monday night that the divestment is part of its overall international strategy.

"This follows the partial divestment undertaken by DBS in October 2012, and is in line with DBS' focus on its core markets of Singapore, Hong Kong, China, Taiwan, India and Indonesia."

The transaction will realise a net gain of about $447 million over the carrying value of the investment, DBS said.

Phillip Securities Research analyst Ken Ang said: "It could make better use of the capital that has been released from this stake sale on organic growth opportunities in its core markets."

CIMB Research analyst Kenneth Ng, meanwhile, noted that the Philippine market has been performing very well and this was a good time for DBS to take profit.

"The other reason, coming into 2014, is that new regulatory rules will come in, which will require banks to deduct the value of minority investments from Tier 1 capital."

As for GIC, the purchase of the stake "is recognition of BPI's long-term value and the Philippine economy's strong fundamentals and growth prospects", the sovereign wealth fund said in a statement on Tuesday.

The Straits Times understands that GIC has investments in other Philippine banks too.

The way the transaction has been structured, GIC will effectively acquire 5.6 per cent of BPI, while Ayala 4.3 per cent. This will take Ayala's total ownership in BPI to 48.3 per cent.

Ayala chairman and chief executive Jaime Augusto Zobel de Ayala said in the same statement that the purchase is both a "value and earnings accretive investment for Ayala" and that BPI has been a significant growth driver for the firm over the years.

"We believe its earnings growth momentum will continue in step with the expansion of the Philippine economy," he said.

"The entry of GIC also ensures the continuity of a stable and committed shareholder base for BPI."

Last week, BPI announced it will raise capital of up to 25 billion pesos (S$715.5 million) by way of a rights offering. Ayala and GIC said they intend to support this initiative.

DBS holds its 9.9 per cent stake in BPI through a private joint venture company with Ayala, and the divestment takes the form of a sale of DBS' shares in that company, as opposed to a sale of BPI shares.

The transaction will be completed in two equal tranches, the first by the end of this year and the second in the first quarter of next year.

DBS chairman Peter Seah is also a director of GIC and as such has abstained from voting on all DBS board decisions in connection with this transaction.

DBS' share price closed flat on Tuesday at $16.94.

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