08 May 2012

CIMB to acquire 60% stake in Philippines' 16th largest bank, Bank of Commerce for RM 881 million at effective price to book ratio of 1.30x, to be settled entirely in cash

(CIMB opening stock price today (8.5.2012) was RM 7.55)

Here is a copy of the press release by CIMB Group on 8 May 2012.

CIMB Group Holdings (“CIMBGH”) today announced that it has entered into conditional Share Purchase Agreements ("SPA") with San Miguel Properties, Inc., San Miguel Corporation Retirement Plan and various minority shareholders (collectively referred to as the “Vendors”) for the proposed acquisition of 60% of Bank of Commerce (BoC) in the Philippines.

The acquisition will be made by CIMB Bank at a price of PHP 181.25 per share. The total consideration for the acquisition of approximately PHP 12,203 million (equivalent to approximately RM 881 million) will be settled in cash. BoC is valued at a price to book of 1.14x as at 31 December 2011; but upon full alignment with CIMB Group’s accounting and provisioning policies, the effective price to book is expected to be about 1.30x.

In conjunction with the acquisition, CIMB Bank has also entered into a Collaboration Agreement with San Miguel Corporation (“SMC”) for the continued support of the SMC ecosystem to BoC. This is to build and foster closer work collaborations between CIMB Group and SMC Group. The San Miguel Corporation Retirement Plan will remain the largest minority shareholder of BoC at 27%.

“As an ASEAN universal bank, this extension to the Philippines is a very natural one. I believe we are entering this market at the right time, with the right deal and right partner.” said Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group.

Incorporated in December 1963, BoC is the 16th largest bank in the Philippines in terms of total assets. It offers a wide range of banking and other financial products and services including traditional deposit products, corporate banking, consumer banking, treasury, asset management, trust services, trade and credit card services targeting consumer, small-to-medium enterprises and corporate customers. BoC currently operates 122 branches and 300 ATMs throughout the Philippines.

“BoC is small today but it can grow quickly with its low loan to deposit base and high capital ratios. BoC also strengthens CIMB Group’s overall regional value proposition of facilitating intra-ASEAN investments and trade as well as travel,” said Nazir. “With this acquisition, our retail network will increase to 1,239 full branches, reaffirming our credential of having ASEAN’s largest branch footprint.”

He added that CIMB Group is optimistic about the long-term prospects of the country’s economy – it being the 5th largest economy in ASEAN and the 2nd largest by population. “The average annual real GDP growth in the Philippines has been approximately 4. 9% for the past 10 years. This, together with the stabilising political situation and pro- business administration; increasing trade links with ASEAN countries and an under penetrated banking market means that the Philippines has the potential of becoming very important to us,” Nazir remarked.

On the Group’s business plans, he said “On the wholesale side, we see the immediate potential of delivering banking and capital markets solutions to corporates. The consumer segment will take us a little more time and investment overall but we can get our remittance proposition up and running quickly. The most exciting part though is the access to the SMC ecosystem which is a huge community of SMC entities as well as suppliers and partners.”

Nazir elaborated that one of CIMB Group’s strengths is the ability to integrate and derive synergy out of its acquisitions. “I have always said that the ability to integrate an acquisition is more important than the acquisition itself. We have a great track record thus far and will look to that as we bring BoC into the fold,” he concluded.

The Proposed Acquisition will not have any material effect on CIMBGH’s consolidated net assets and earnings in respect of the financial year ending 2012 and will not have any effect on CIMBGH’s share capital.

Source: CIMB Group


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