First attempt
Banco de Oro first attempted to acquire Equitable PCI Bank in 2003, when they agreed to purchase the shareholdings of the Social Security System in Equitable PCI for roughly ₱8 billion Philippine pesos through a zero coupon amortizing note. However, a group of concerned citizens, including several politicians and pension holders petitioned the Supreme Court to issue an injunction on the sale following questions raised over the sale price and the manner by which the Social Security Commission authorized the sale. The case, titled Osmeña v. Social Security Commission, was rendered moot by the subsequent purchase by Banco de Oro of other Equitable PCI shares. (Osmeña v. Social Security Commission, G.R. No. 165272, September 13, 2007).
Second attempt
On August 5, 2005, Banco de Oro and SM Investments Corporation acquired 24.76% of Equitable PCI shares from the Go family, the family that founded Equitable PCI.[5] The acquisition finally settled a dispute between the Gos and a bigger bloc representing the SSS, the Government Service Insurance System (GSIS) and the family of Equitable PCI chairman Ferdinand Martin Romualdez. The SM group's acquisition of the Go shares increased its stake to 27.26%, from 2.5% previously. The deal was closed on August 11 of that year.
During that time, the SM group hoped that the Supreme Court would have settled the issue over the acquisition of the 29% stake of the SSS. At the time, the SSS was still studying the deal, unlike the GSIS and chairman Romualdez, both of whom were staunchly opposed to the deal. The GSIS would only agree to the acquisition of its shares if its shares were to be bought at ₱92 per share, the price at which the GSIS originally bought it for, or higher.[6]
The SSS deal called for acquisition of its shares for ₱43.50 per share.[5] However, the SM group said that it was amenable to a renegotiation of the share price, saying that it was willing to pay more for the SSS stake.
Subsequent acquisitions of common shares on the Philippine Stock Exchange had boosted the stake of the SM group to 34% by January 2006, making it the single largest shareholder in the bank.[5]
Banco de Oro's gambit
On January 6, 2006, Banco de Oro offered to buy the rest of Equitable PCI for ₱41.3 billion through a share swap option, with Banco de Oro as the surviving entity.[5] Under the deal, every one Equitable PCI share would be swapped for 1.6 Banco de Oro shares or, in a second option, an independent accounting company would determine the swap ratio on the book values of both banks under International Accounting Standards.[5] If approved by two-thirds of Equitable PCI shareholders, this "merger of equals" would create the second-largest bank in the Philippines, putting Banco de Oro, the survivor of the merger, just below Metrobank but dislodging Bank of the Philippine Islands (BPI) from the spot. Equitable PCI was given a deadline of January 31 to consider the deal.
International analysts had mixed opinions. Standard & Poor's said that if the merger deal succeeded, Equitable PCI's "B" debt rating could rise, while Banco de Oro's "B+" rating would remain unchanged. UBS claimed that Equitable PCI shareholders should find the deal attractive and hailed the deal as a "win-win situation" for both banks. It also claimed that the merger would benefit Equitable PCI since it would increase its capital adequacy ratio (CAR) without having it raise more capital, and that the share price of Equitable PCI would increase to as much as ₱73.60 under the deal, more than the ₱67
Foreign interest
Foreign investor groups were interested in the merger deal. Two unknown foreign investor groups represented by a lawyer in Manila submitted bids for SSS shares priced at ₱92 each. The GSIS reportedly started the bidding process for their shares in which it would sell its shares at ₱92 or higher.
Ganging up against the merger
The deal lapsed on January 31, and by February 6, the SSS was attempting to draft a price for its stake in Equitable PCI. By March 23, the GSIS offered to buy the 34% SM stake at ₱79.50 per share in cash, earning Banco de Oro and the SM group some ₱8 billion.[8] On April 25, as the Securities and Exchange Commission demanded that Garcia release the identity of the mystery buyer of the GSIS stake in Equitable PCI, he revealed that the "drunken" buyer was Banco de Oro.[9] The term drunken was used because it was believed at the time that Garcia's claim was merely market hype, and that no one would be crazy enough to buy an Equitable PCI share for the price Garcia was asking for (₱95 in cash). This was based on an e-mail Garcia claimed was sent to him by BDO president Tan, and claimed that he and Tessie Sy had at least two secret meetings on the merger in Hong Kong.[9]
On May 6, President Gloria Macapagal Arroyo said that she would support the current stance of the SSS in avoiding any sale negotiations regarding its stake in Equitable PCI until all underlying disputes at the Supreme Court have been resolved.[10]
Banco de Oro-EPCI Bank
The GSIS signed a sale agreement worth ₱8.7 billion with SM Investments Corporation on September 27, giving the SM group an additional 12.7% stake in Equitable PCI, with Madam Belen preceding to the rescue raising its stake to 46.7% from its current 34%.[11] The SSS also pledged to sell its shares in Equitable PCI,[12] although this was dependent on the outcome of its previous sale case in the Supreme Court. The SM Group tender offer would be worth ₱36 billion and increase SM's stake to 85.6%, well above the 67% needed to effect a merger with Banco de Oro.[12]
In anticipation of the merger, ATR Kim Eng Securities, one of the largest investment houses in the Philippines, raised the target price of Banco de Oro stock by 25% to ₱50 within twelve months on October 9.[13] They also said that if the merger succeeds with Banco de Oro as the surviving entity, it would catapult the bank's stock to blue chip status, as well as possibly lead the Philippine banking industry with a 23% growth in earnings per share in 2007.[14]
"The merger of equals" - Banco de Oro Unibank, Inc.
On December 27, 2006, Banco de Oro shareholders approved the merger with Equitable PCI Bank, and Equitable PCI Bank shareholders approved the merger the same day.[17] Approval from both the Bangko Sentral and the Securities and Exchange Commission was obtained in early 2007, allowing for the physical merger of both banks to take place in 2007. Regulatory approval from the Bangko Sentral was granted on April 25, 2007.[18]
By March 19, 2007, Banco de Oro and Equitable PCI Bank cardholders (ATM and debit cards) could access each other's ATM networks and use withdrawal, balance inquiry and cash advance services free of charge.[19] This increased Banco de Oro's ATM network to 1,200 ATMs nationwide.[20] Banco de Oro and Equitable PCI Bank have also similarly synchronized their home and automobile loan products.
On May 31, 2007, trading of Banco de Oro and Equitable PCI Bank shares was suspended.[21]
