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Stock Commentary

UnionBank gives new SRO details in preliminary prospectus

Merkado Barkada
UnionBank gives new SRO details in preliminary prospectus

The banking arm of the Aboitiz Family, UnionBank [UBP 97.80 2.95%]released the preliminary prospectus for its upcoming stock rights offering (SRO), and it contains some new information to help us better understand the scope of the offering.

First, the prospectus says that the offering will be limited to P40 billion worth of SRO shares, so while the maximum number of shares on offer is 800 million, the actual number of shares that will end up being on offer will have to be significantly lower if the SRO offer price range is P64.55 to P73.78.

At the lower end of the price range, UBP would sell a maximum of 619.6 million shares, and at the higher end of the range, it would sell a maximum of 542.1 million shares.

There’s also a ton of new boilerplate legal language limiting UBP’s ability to “pull a DITO” (unilaterally terminate the offering) in the prospectus that is likely indicative of what the PSE will consider be a minimum requirement for similar offerings going forward.

For more detail and context, check out this great Twitter thread by Miguel Camus of the Inquirer.

It’s possible for an SRO buyer to get more than their entitlement amount, but full payment of all shares requested must be made up-front.

Any shares that are not purchased by existing UBP shareholders in the 1st and 2nd rounds of the SRO offer, and that are not purchased by UBP’s main shareholders, Aboitiz Equity Ventures [AEV 59.50 1.54%], Insular Life, and SSS, will be taken up by the joint underwriters (CLSA Exchange Capital, Inc. and ING Bank N.V., Manila Branch).

MB BOTTOM-LINE

We still don’t know the entitlement ratio that UBP will use to determine the per-shareholder maximum allocation, but I don’t think it’s going to be some crazy number.

This is a somewhat modest SRO, as the total number of shares to be sold (542 to 620 million) represents only 35-40% of the bank’s current outstanding shares, and will represent around 30% of the bank’s post-SRO outstanding shares.

Depending on the final price, I could see the ratio being something like 1 SRO share of allocation for every 2.5 UBP shares owned, or something in that vicinity.

I’m relieved to see the new language that appears to greatly limit the ability of UBP and its underwriters to simply walk away from the SRO during the process.

Immediate changes to the legal language supporting the process were required.

Now, whether DITO or some other company can pull the same move again on this language remains to be seen, but at least it looks like the “but I don’t feel like it anymore” loophole that DITO used has been closed.     

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

PHILIPPINE STOCK EXCHANGE

UNIONBANK OF THE PHILIPPINES

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