BDO UNIBANK, Inc. is selling its controlling stake in its publicly listed subsidiary BDO Leasing and Finance, Inc. (BDOLF), to a third party for about P5.451 billion as part of the restructuring of its leasing business.

In a filing with the local bourse on Tuesday, BDO said it has entered into an agreement to sell its equity stake worth 88.54% of BDOLF.

The bank said the amount of consideration is equivalent to the sellers’ pro-rata share in the net asset value of the firm as of the closing date which is estimated to be at P5.451 billion. Apart from this, a premium of P400 million shall also be paid upon closing of the transaction.

BDO said so far, the purchasers already paid on Jan. 24 a total P65 million as downpayment for more than 1.9 billion shares in BDOLF. The balance shall be paid at closing.

“The restructuring of BDO’s leasing business is being undertaken to optimize the financial needs of clients in light of new accounting regulations covering lease transactions,” the bank said in the filing.

In January 2019, International Financial Reporting Standards or IFRS 16 — which requires leases to be recognized on-balance sheet just like a loan facility — took effect.

“This makes lease transactions a less attractive option to corporate borrowers compared to the past,” BDO said in a statement last Friday.

BDO said the sale was approved by its board of directors on May 25.

“We wish to reassure BDOLF clients that their financing requirements will continue to be serviced, and there will be no effective change in their existing lease arrangements that will be assumed by BDO Finance,” BDOLF President Roberto E. Lapid said in a statement on Friday.

Under the sales agreement, BDOLF will adopt a new name while its Articles of Incorporation and By-laws shall be revised based on its new business direction.

Moreover, a tender offer will also be done by the buyer as a regulatory requirement. This will provide minority shareholders a chance to sell their BDOLF shares.

As part of BDO’s restructuring of its leasing business, the parent bank incorporated its new, privately held finance firm BDO Finance Corp. to give customers access to lease products and services. BDO Finance will also assume current lease transactions booked by BDOLF.

BDO’s net income climbed by 43.35% to P11.967 billion in the third quarter of 2019 from P8.348 billion in the comparable year-ago period, buoyed by higher recurring core revenues.

This brought its income in the nine months to September to P32.1 billion, improving by 49.3% from the P21.5 billion seen in the same period of 2018.

The bank’s shares closed at P153.50 apiece on Tuesday, down by 1.60% or 2.50 centavos from Monday’s finish. — LWTN

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