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Josef Karlo V. PradoFNC535M Financial ManagementJanuary 23, 2016

Bonus Paper Ban! o" #o!yo$Mistu%is&i's (c)uisition o" *ecurity Ban!

In a deal that represented the largest investment of a foreign financial institution

in a Philippine Bank (Bloomberg), he Bank of ok!o"#itsubishi $%J &td. (B#$),

has signed an agreement to purchase a ' percent stake in ecurit! for a total

amount of about P*+ Billion pesos, and is even considering further investment in the

firm. ata sho-s that this amount is '. times book value and e/ceeds the average

share price of ecurit! Bank b! + percent, signaling strong investor confidence on

the part of B#$.

#$%0 has recentl! been ver! active in terms of regional e/pansion presumabl!due to general economic slo-do-n in Japan brought about b! population decline

and ver! lo- interest rates. It might appear surprising that the largest financial

institution in Japan -ould opt to purchase a second"tier bank such as ecurit! Bank,

instead of the far more established pla!ers such as B1, BPI, or #etrobank.%rom an investment perspective ho-ever, the ac2uisition makes a lot of sense.

he attractiveness of an e2uit! investment is driven b! the potential for future

returns, -hich means that gro-ing companies make for ver! attractive investment

prospects. Banks such as B1 alread! have ver! e/tensive branch net-orks

nation-ide, -hich means that their gro-th potential is some-hat limited due to

saturation. 3 bank such as ecurit! Bank on the other hand is e/panding ver!

rapidl!. It has plans to gro- its branch count from its current '4' branches to a total

of 5 b! '' (Bloomberg). 3s such, the future value of the bank -ill likel! prove

substantiall! higher than its current value, and prove to be a ver! valuable

investment for its Japanese shareholders.