PBCom and AsianBank Announce Plans to Merge

December 24, 1998 PSE CIRCULAR FOR BROKERS NO. 2813-98 December 23, 1998 PBCom and AsianBank Announce Plans to Merge AsianBank Corporation and the Philippine Bank of Communications (PBCom) announced today that they have signed a memorandum of understanding (MOU) to pursue the merger of the two banking institutions. AsianBank and PBCOM are both universal banks and are equal in size in terms of total resources. With the merger, the merged bank will have a total asset base of approximately 65 billion pesos which would allow it to become one of the top ten private domestic banks in the country. The merged bank will also have approximately 8 billion pesos in capital, a significant source of strength particularly in the context of the difficult economic environment. Among the initial agreements reached by both banks is to maintain PBCom as the surviving entity, in consideration of its listed status in the Philippine Stock Exchange. Both parties have agreed to designate Mr. Ralph Nubla, Sr. as Chairman Emeritus and Messrs. Chung Tiong Tay and Luy Kim Guan as Vice-Chairman. The parties also agreed to name Mr. Ramon R. del Rosario, Jr. as the Chairman and Chief Executive Officer and Mr. Edward S. Go as the President and Chief Operating Officer of the merged bank. Both parties also committed to reach an agreement on a mutually acceptable name for the merged bank. LexLib The proposed merger of the two banks was driven by the desire of both institutions to acquire greater competitive advantages in a marketplace that has become very challenging. Aside from the advantages brought by size, the merger will also lead to the creation of a retail network composed of more than 100 branches, thus giving the Bank significant reach to be of service to existing and new customers. Moreover, the two banks complement each other in terms of the markets that they serve. AsianBank's focus on the corporate market and high net-worth individuals complement PBCom's focus on the traditional Filipino-Chinese market and medium-sized enterprises. The two banks hope to serve these customers better through the expanded range of financial services that the merged bank will be able to offer. The merged bank will be able to offer the entire range of commercial banking and capital markets services. AB Capital and Investment Corporation, AsianBank's investment banking subsidiary, will become a subsidiary of the merged bank and would be able to offer alternative financing services to corporate clients and a wider array of investment options to investors. Aside from the competitive advantages that can be gained, the merger was also driven by the desire to expand the respective banks' capital bases and comply with the higher requirements set by the Bangko Sentral ng Pilipinas (BSP). The P8 billion in capital that the merged bank will enjoy is more than sufficient to comply with the P4.5 billion capital requirement as of yearend 1998. This capital base will in fact allow the merged bank to comply with the even higher requirement of P5.4 billion by the end of the year 2000. The MOU between AsianBank and PBCom now paves the way for a due diligence review of both banks to determine their respective values. The due diligence review is expected to be completed in the first quarter of 1999. With a successful resolution of the valuation and all other relevant issues related to the merger, the two banks hope to execute the final agreement to merge within the first semester of 1999. The proposed merger, however, will be subject to the approval by the BSP. Both banks expressed confidence that the various merger issues can be satisfactorily resolved as both exhibited great desire to work together to see the birth or a stronger and much better financial institution that will be well-placed to compete effectively as the new millennium dawns.