Philippine Government's PNB Stake Auction Likely to Fail, Citing High Premium and Lack of Declared Bidders

Strategic Insights -

The Philippine government's second attempt to auction off its 30 per cent stake in ailing Philippine National Bank (PNB) is expected to fail, despite cutting the floor price for shares from 85 pesos to 80 pesos per share. The reduced price still represents a 38 per cent premium on the bank's closing price of 58 pesos yesterday. Finance Secretary Jose Pardo expressed optimism about the bid, but analysts claim that the price cut will not attract more bidders and that the auction is "all a set-up" to facilitate a negotiated sale to tycoon Lucio Tan.

Key Takeaways:

  • The Philippine government's second auction of its 30 per cent stake in PNB is likely to fail due to the high premium of 38 per cent over the bank's closing price of 58 pesos yesterday.
  • The reduced floor price of 80 pesos per share, bought for cash, is still unappealing to potential bidders, with no declared bidders emerging yesterday.
  • Analysts believe that the government is setting up the auction to fail, with the aim of conducting a negotiated sale to Lucio Tan, who already controls 46 per cent of PNB.
  • The government's attempt to use the PNB sale as a means to deny cronyism accusations has been compromised, as Tan is a friend of President Joseph Estrada.
  • Lucio Tan may soon gain full control over PNB, which has a weak capital base, high levels of non-performing loans, and inefficient management.
  • A special PNB shareholders' meeting on Friday is scheduled to approve a plan for a 20bn peso share offering to raise much-needed capital.
  • Several foreign and local investors, including an unnamed Malaysian group and the US-based food company TLC Beatrice, had initially expressed interest in the 30 per cent stake but have since withdrawn.

Statistics:

  • Closing price of PNB shares: 58 pesos
  • Reduced floor price: 80 pesos per share
  • Premium over closing price: 38 per cent
  • Total shares to be sold: 30 per cent stake
  • Amount of share offering: 20bn pesos
  • Lucio Tan's current stake in PNB: 46 per cent

Sources:

  • "The Manila Times"
  • Finance Secretary Jose Pardo, finance secretary
  • Analyst with a foreign bank (name not mentioned)
  • Leny de la Rosa, GK Goh Securities
  • Philippine National Bank (PNB) officials