MUFG buys 20% stake in Philippines' Security Bank

By Staff Writer

Jan 17, 2016 02:57 AM EST

Japan's Mitsubishi UFJ Financial Group Inc. is said to have decided to purchase a 20 percent stock in Philippine's lender Security Bank Corp for $773 million (36.9 billion pesos), as an effort to widen its growth in Southeast Asia. According to the reports, the offer price represents an 81 percent of the premium on Philippine lender Security Bank's Wednesday concluding price of 135 pesos.

The Security Bank agreed to MUFG's offer to purchase 150.7 million newly issued common shares at 245 pesos each and 200 million preferred shares at 0.1 pesos per piece, Bloomberg said, quoting the bank's filing statement.

According to Bloomberg, Philippines' rules on foreign bank proprietorship, which it loosened in 2014, have deepened Japan's giant lenders' interest to invest in Philippine. This would be the biggest equity investment in the Philippines' financial institution with a foreign lender. This agreement will enable Security Bank to increase its growth strategy as well as extend its branch network, according to the bank itself.

Nikkei Asia said that the primary unit of Mitsubishi UFJ Financial Group plans to spend around 100 billion yen in Philippines' Security Bank, purchasing the shares through private placement and thus becoming the second leading stockholder. MUFG's move for expansion in Southeast Asia tails the 2013 acquisition of Bank of Ayudhya in Thailand.

Philippines continues to enjoy economic growth of about 6 percent to 7 percent per year, thereby attracting foreign investors like Toyota Motor including other Japanese institutions. The ASEAN Economic Community, which is currently underway, and the U.S.-led Trans-Pacific Partnership have made the country well-positioned for long-term development.

Sumitomo Mitsui Banking Corp., one of MUFG's peer, purchased equity in Hong Kong's Bank of East Asia last year.

"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 Philippine economy," said, citing Security Bank chair Alberto Villarosa.

Alfonso Salcedo, Jr., president of Security Bank told reports that, "The additional capital will help us execute faster and with more scale our strategy to build our retail banking business as a third business pillar alongside Wholesale Banking and Financial Markets. It will allow us to accelerate the expansion of our branch network to support retail market penetration as well as make inroads into the Japanese business sector". 

The transaction, which is scheduled to be closed within the first six-month of 2016, is subject to Philippines' regulatory approval. In addition, the acquisition will rise Philippines' lender Security Bank's shareholder capital to P89.3 billion from P52.4 billion on proforma after transaction basis.

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