WHY hasn’t businessman Lucio C. Tan taken any move to merge Philippine National Bank (PNB) with Allied Banking Corp.? Is it because, Mr. Tan, who controls a conglomerate that includes Asia Brewery Inc. and Fortune Tobacco Corp., is not ready to take his Allied Bank totally public by marrying it with PNB?

Allied Bank, formerly General Bank and Trust Co., may not qualify as a public company in the strictest sense of the two-word phrase as it has only 50,000 preferred shares listed in 1982 on the Manila Stock Exchange and Makati Stock Exchange, which have been merged yeas ago to form what is now the Philippine Stock Exchange (PSE). In short, like some other companies in the market today, Allied Bank may be listed but it is not necessarily public. But since it has passed all the requirements imposed by the two exchanges when it went public 26 years ago, nobody could question today the bank’s qualification as a listed entity. 

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There may be some advantages to going public in this country but these may be far outweighed by a number of disadvantages that Mr. Tan has been right in not sharing Allied Bank’s common shares with outsiders. Anyway, there is nothing in the listing rule of the present PSE that requires Allied Bank, or any other listed company, to broaden the ownership of its voting shares. If it was enough that the bank’s 50,000 preferred shares be listed to be public, so be it; never mind it these are held by two stockholders, such as Iris Holdings and Development Corp. and Virgo Holdings Development Corp., with 25,000 preferred shares each. The two corporate stockholders, which belong to the LT group of companies, also hold a total of 99,554 common shares in Allied Bank, or 20.099 percent. Mr. Tan directly owns 66,134 common shares, or 13.352 percent. 

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With its common shares privately held, Allied Bank allows Mr. Tan corporate peace. This cannot be said of PNB despite his and his group’s acquisition of the government-owed shares.  

WHY hasn’t businessman Lucio C. Tan taken any move to merge Philippine National Bank (PNB) with Allied Banking Corp.? Is it because, Mr. Tan, who controls a conglomerate that includes Asia Brewery Inc. and Fortune Tobacco Corp., is not ready to take his Allied Bank totally public by marrying it with PNB?

Allied Bank, formerly General Bank and Trust Co., may not qualify as a public company in the strictest sense of the two-word phrase as it has only 50,000 preferred shares listed in 1982 on the Manila Stock Exchange and Makati Stock Exchange, which have been merged yeas ago to form what is now the Philippine Stock Exchange (PSE). In short, like some other companies in the market today, Allied Bank may be listed but it is not necessarily public. But since it has passed all the requirements imposed by the two exchanges when it went public 26 years ago, nobody could question today the bank’s qualification as a listed entity. 

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There may be some advantages to going public in this country but these may be far outweighed by a number of disadvantages that Mr. Tan has been right in not sharing Allied Bank’s common shares with outsiders. Anyway, there is nothing in the listing rule of the present PSE that requires Allied Bank, or any other listed company, to broaden the ownership of its voting shares. If it was enough that the bank’s 50,000 preferred shares be listed to be public, so be it; never mind it these are held by two stockholders, such as Iris Holdings and Development Corp. and Virgo Holdings Development Corp., with 25,000 preferred shares each. The two corporate stockholders, which belong to the LT group of companies, also hold a total of 99,554 common shares in Allied Bank, or 20.099 percent. Mr. Tan directly owns 66,134 common shares, or 13.352 percent. 

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With its common shares privately held, Allied Bank allows Mr. Tan corporate peace. This cannot be said of PNB despite his and his group’s acquisition of the government-owed shares.

Prior to a follow-up offering last year, Philippine Deposit Insurance Corp. owned 54,357,751 shares, or 9.482 percent, while the National Government held 17,454,140 shares, or 3.044 percent. He has to continue to contend today with the minority stockholders, who have been pressuring him for dividends which he and the bank’s board which he controls could not possibly grant for one good reason: PNB has nothing to give in dividend be it in cash or in stock because of its huge deficit, which, however, its profitability has trimmed down to P1.817 billion as of September 30, 2007. 

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A recent filing posted on the PSE web site informed regulators that Allied Bank is increasing its authorized capital stock to 20 million shares from the present 500,000 shares. The latter stock consists of 50,000 preferred shares and 450,000 common shares. Both classes have par value of P1,000. The capital increase may be seen as a first step in merging PNB with Allied Bank. But it seems, this is not so. Allied Bank is raising its authorized capital stock to accommodate the conversion into common shares of the $50 million Tier 2 capital it floated in the international market in 2002. Besides, P20-billion authorized capital is too small to accommodate PNB’s 662,245,916 outstanding shares, or P26,489,836,640 at par value of P40 per share. Allied Bank now has 495,295 outstanding shares, or P495.295 million at par value of P1,000 per share.

(Allied  Bank will hold its stockholders’ meeting on March 12, 2008 at Allied Bank Center to ratify the increase in the bank’s authorized capital to P20 billion from P500 million. The equivalent in additional capital stock will be filled up by the conversion of $50 million into 2,807,200 common shares. The exchange rate was pegged at P56.144 as of December 23, 2004, which was the date of issue. The issuance of these shares will increase Allied Bank’s outstanding capital to 3,252,495 common shares from 445,295.) 

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Merging Allied Bank and PNB, just in case Mr. Tan has a sudden change of plan, may take time. First, PNB has to rid itself of its deficit. Second, if Allied Bank will be the surviving entity, then it has to expand more its authorized capital stock to accommodate PNB’s outstanding shares.

Based on PNB’s financial reports as of September 30, 2007, it can easily wipe out its deficit, which the Securities and Exchange Commission would readily approve given a legal opinion it issued some years back.

What remains for Mr. Tan’s lawyers and financial advisors is choosing between swapping Allied Bank’s shares with PNB shares and making a tender offer.

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WHY hasn’t businessman Lucio C. Tan taken any move to merge Philippine National Bank (PNB) with Allied Banking Corp.? Is it because, Mr. Tan, who controls a conglomerate that includes Asia Brewery Inc. and Fortune Tobacco Corp., is not ready to take his Allied Bank totally public by marrying it with PNB?