Union Bank of the Philippines, the lending arm of the Aboitiz Group, plans to raise up to P40 billion from a stock rights offering to fund the acquisition of Citibank’s consumer banking business in the Philippines.
UnionBank said in a disclosure to the stock exchange Friday its board of directors, in a special meeting on Dec. 23, approved the capital-raising initiative.
“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 to all existing shareholders,” it said.
“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., The Insular Life Assurance Co. Ltd. and Social Security System—are committed to fully subscribe to their respective allocations as well as to any SRO shares not taken up by other shareholders,” the bank said.
“In relation to the acquisition of Citigroup’s consumer banking business, the transaction value is not yet final and is subject to regulatory approvals. Further disclosures will made as appropriate,” it said.
The bank on Thursday signed a share and business transfer agreement with several subsidiaries of Citigroup Inc. to acquire Citi’s consumer banking business in the Philippines for P55 billion.
The transaction includes Citi’s credit card, personal loans, wealth management and retail deposit businesses. The acquisition also includes Citi’s real estate interests such as Citibank Square in Eastwood, three full service bank branches, five wealth centers and two bank branch lites.
UnionBank chairman Erramon Isidro Aboitiz said the acquisition would further cement its position as a leading bank in the Philippines.
Under the agreement, UnionBank will pay cash for the net assets of the Citi Philippines consumer business, subject to customary closing adjustments, plus a premium of P45.3 billion. Based on the anticipated increase in risk-weighted assets, the required equity is about P9.7 billion as of June 30, 2021.
The acquisition is expected to close in the second half of 2022, which the completion subject to regulatory approvals from the Monetary Board of the Bangko Sentral ng Pilipinas, Philippine Competition Commission, Philippine Deposit Insurance Corp., Securities and Exchange Commission and Insurance Commission.
About 1,750 Citi employees, including senior management, are expected to join UnionBank. “We are looking forward to welcoming all employees to the UnionBank family. With the strong cultural similarities between the organizations, we believe Citi’s employees will feel at home at UnionBank,” Aboitiz said.
UnionBank is the seventh largest publicly-listed bank in the Philippines and is widely recognized to be the leading digitally transformed and most innovative bank in the industry. It is among the first to embrace technological innovations to empower customers and is committed to be the Philippines’ leading digitally-transformed bank to best serve the growing needs of Filipinos everywhere.
Citi’s consumer banking business had total assets of P89.5 billion including gross loans of P59.7 billion, total liabilities of P71.7 billion including deposits of P67.8 billion, investment AUM of P95.0 billion and a customer base of close to 1 million as of end-June.