SEVERAL big banks have offered to buy Citibank N.A. Philippines' consumer banking business in the country but it seems Union Bank of the Philippines ($:UBP) has the upper hand in this contest.
In a disclosure on Dec. 23 to the Philippine Stock Exchange, UBP said its board of directors, at a special meeting, approved the acquisition of Citibank Phil. Branch.
To fund the acquisition, the board approved the raising of additional capital of up to P40 billion through the issuance of additional shares from the bank's unissued authorized capital stock via a stock rights offering (SRO) to all existing stockholders.
UBP continued with its disclosure:
"The proceeds of the SRO will be utilized for the acquisition of Citigroup's consumer banking business in the Philippines.The Bank's shareholders -- Aboitiz Equity Ventures Inc., ($:AEV) The Insular Life Assurance Co. Ltd. and Social Security System (SSS) -- are committed to fully subscribe to their respective allocations as well as to any SRO shares not taken up by other shareholders.
"In relation to the acquisition of Citigroup's consumer banking business, the transaction value is not yet final and is subject to regulatory approvals."
This trophy acquisition of Citi PHL should be welcome news and should excite investors and retail traders, among them the existing shareholders such as this columnist, enough to pump the price of $:UBP.
But also, the market knows best and is never obvious.
$:UBP was doing very well at 112.00 open until the company requested for a one-hour halt so that shareholders and the public may be able to digest the essence of their disclosure.
When trading resumed at 10:30 a.m. Dec. 23, the chart formed a red candle to reflect market sentiment.
At 2:16 p.m. as I write this, $:UBP was trading at 102.90, down by -6.90 or -6.28 percent.
Why is this so?
Existing shareholders are selling, perhaps expressing their concern that the coming SRO will dilute their shares.
But I am holding on, for several reasons.
UBP is one of only 5 banks granted a digital banking license by the Bangko Sentral ng Pilipinas. Business should perk up next year, especially with this Citibank acquisition.
Also, I had accumulated $:UBP stock before its breakout and gap up, and waiting for the payment of my numerous 25% stock dividends on January 5, 2022.
The support line should hold; if not, the MA 20 line is there to protect the price.