By Bianca Cuaresma
SECURITY Bank Corp. signed on Thursday a landmark partnership deal with the Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan’s largest bank, that completes a P37-billion buy-in equal to 20 percent of the local lender.
Once completed in the second quarter this year, the transaction will go down as the largest equity investment by a foreign investor in any Philippine financial institution.
BTMU, the commercial banking arm of the Mitsubishi UFJ Financial Group, agreed to buy 150.7 million newly issued common shares of Security Bank at P245 per share.
The price represents a premium of 81 percent on Security Bank shares worth P135 a share at the close of trading on Wednesday at the Philippine Stock Exchange.
BTMU is also buying 200 million preferred Security Bank shares at P0.10 each.
The P36.943-billion, or $782-million transaction, allowed Security Bank to be ranked fifth largest in the country in terms of capital, next only to the Philippine National Bank.
The transaction also raised the local bank’s capital base by 70 percent to P89.3 billion, from P52.4 billion as of September 2015, on a pro-forma post-transaction basis.
At 20 percent of the local bank, Japan’s financial services giant is now the second-largest Security Bank stakeholder. The Dy Group will remain the local lender’s biggest shareholder, with majority voting control.
The same stake also entitles BTMU two of the 11 seats at the bank’s board of directors.
Security Bank officials said the partnership will enhance shareholder value by leveraging on the capital infusion and the new technologies and strategies brought in by BTMU to accelerate its own growth strategy in the Philippines—including the expansion of its branch network and increasing its penetration of the domestic retail market.
Security Bank Chairman Alberto Villarosa told reporters they are looking at growing their physical network to more than 500 by 2020. Currently, Security Bank remains “under-represented” in certain areas of the country with only 262 branches nationwide.
“The transaction will position Security Bank as a large independent bank supporting the growth of the Philippines’s economy, with the strength and capabilities to compete with other larger financial institutions,” Villarosa said.
For the foreign bank, BTMU looks forward to expanding its business platform and its presence in the region. BTMU Asia and Oceania region CEO Go Watanabe said they chose to invest in the Philippines due to its relative strength and importance in the region. The Japanese executive cited the country’s robust gross domestic product (GDP) numbers and its rather young demographics.
Watanabe also said they see more companies from Japan and others in the region wanting to invest in the Philippines, making them in a position to service these companies’ financing needs.
“The strategic partnership with Security Bank reinforces our Asia strategy and enables both parties to offer a more comprehensive financial service to a wider range of customers in the Philippines,” the Japanese CEO said.
Through the partnership, BTMU looks to establish a comprehensive financial service platform, including retail banking service, that meet its clients’ needs in the Philippines. The BTMU has adopted such an equity alliance business model in several countries in Asia, including Vietnam.
The Japanese lender is known for its retail and SME business capabilities that are new business areas for BTMU in the Philippines.
Watanabe said: “BTMU has been focusing on Asia as one of its core markets for growth. It is a strategic intent for the bank to identify the right partner in the higher growth markets like the Philippines, to deepen our presence, including through inorganic means.”
“This strategic partnership with Security Bank reinforces our Asia strategy and enables both parties to offer a more comprehensive financial services to a wider range of customers in the Philippines. We believe in Security Bank’s growth strategy and are keen to play a role and be part of its transformational journey,” he added.
“We are elated to have BTMU as a strategic shareholder and business partner. The transaction will position Security Bank as a large independent bank supporting the growth of the Philippines’s economy, with the strength and capabilities to compete with other larger financial institutions,” Villarosa said.
Image credits: Roy Domingo