The Philippine Stocks Market reached another new highs last week amid talks of merger between Bank of the Philippine Islands (PSE:BPI) and Philippine National Bank (PSE:PNB). PNB in itself is in the final stages of a merger with Allied Banking Corporation (PSE:ABC) with PNB as the surviving entity.
Needless to say the market was ecstatic on the news. Financials sub-index alone jumped by 5.08% or 71.55 within a week. The merger, once finalized, will create the biggest bank in terms of asset. BDO Unibank (PSE:BDO) currently hold the distinction with P1.15 trillion. BPI, PNB and ABC's combined assets is estimated at P1.20 trillion. The merger also brings in two big names in business today. Ayala group (PSE:AC) currently own the largest stake in BPI while PNB and ABC are both owned by Lucio Tan's LT group (PSE:LTG). Early reports say that the proposed merger will be done via share swap, which will make LTG the second largest owner of BPI with 20% stake, while AC will own 33%.
For investors, what's important to note is how much will BPI prices the acquisition. LTG eyes the deal at around P95-P96 or 1.8 times PNB's book value of P56. PNB stocks last traded at P84.30 so there's still significant upside for profit. An alternative would be to buy BPI shares, last traded at P92.80. Both parties target to push through with the merger before year ends, so the consolidation would mean higher reported profits for BPI.
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Disclaimer: This article is solely the opinion of the blogger based on personal research. Any statement made is not a conclusion of absolute fact and is not intended to impose or persuade anyone's judgement.