LBP-UCPB Merger and PDIC Share Acquisition

The Order anchors its policy direction on Section 2 of Republic Act No. 11524, declaring State policy to consolidate coconut farmers’ benefits under various statutes and expedite delivery to increase incomes, alleviate poverty, and achieve social equality.
The Order also invokes Section 2 of Republic Act No. 10149 (the “GOCC Governance Act of 2011”) on active centralized exercise of ownership rights in GOCCs to promote national development-aligned operations and efficient use of government assets and resources.
The Order relies on Section 5(a) of Republic Act No. 10149, empowering the Governance Commission for GOCCs (GCG) to determine, based on evaluation of performance and relevance, whether merging certain GOCCs is in the State’s best interest.
The Order cites Section 28 of Republic Act No. 10149, requiring that any government agency or GOCC seeking to purchase a corporation or acquire controlling interest submit its proposal to the GCG for review and approval of the President.
The Order recognizes Presidential Decree No. 251 (s. 1973) granting LBP universal banking powers, including expanded activities and lending to agricultural, industrial, and home financing projects and other productive enterprises.

Section 1 approves the merger of UCPB with LBP, with LBP as the surviving entity.
Section 1 makes the merger subject to requisite approvals from the Securities and Exchange Commission, and subject to conditions and limitations under Republic Act No. 11524 and Republic Act No. 11232 (the “Revised Corporation Code of the Philippines”).
Section 1 directs that, except as otherwise prescribed in Section 2, UCPB and LBP, in consultation with the GCG, determine the merger mode and implement it with approval of the relevant regulatory agencies.
Section 1 orders that all assets and liabilities of UCPB shall be transferred to LBP.
Section 2 requires LBP to acquire the outstanding Special Preferred Shares held by PDIC in UCPB, taking into account (a) recovery of PDIC’s financial assistance to UCPB, (b) valuation of the shares by PDIC and LBP, and (c) LBP’s return on equity.
Section 2 states that the approval is without prejudice to the terms and conditions in PDIC’s February 8, 2021 approval of the sale of its Special Preferred Shares to LBP.

The Order endorses a shareholding acquisition representing 88.91% of UCPB’s authorized capital stock, linked to PDIC’s Special Preferred Shares acquisition by LBP.
The acquisition is tied to a total par value of PHP 12 Billion for PDIC’s Special Preferred Shares.
Section 2 directs that the acquisition process consider PDIC’s valuation and LBP’s valuation for the purpose of the transaction.

Section 3 requires UCPB and LBP to prepare and implement an integration plan toward full implementation of the merger.
Section 3 mandates that the integration plan follows existing laws and regulations.
Section 1 directs all other government offices and agencies to promptly take actions necessary to fully implement the Order within six (6) months from effectivity, subject to applicable laws and regulations.

Section 4 authorizes LBP to adopt and implement a reorganization plan.
Section 4 provides that LBP’s reorganization plan requires approval by the LBP Board of Directors, and must comply with Republic Act No. 10149 and the rules and regulations of the GCG.
Section 4 provides that LBP personnel separated as a consequence of reorganization may be entitled to separation incentives fixed by the LBP Board of Directors.
Section 4 requires that UCPB personnel separated as a consequence of the merger shall be paid separation benefits by UCPB pursuant to UCPB’s separation-benefits guidelines it may adopt and applicable laws and rules.
Section 4 allows, when applicable, that separated UCPB personnel may be hired by LBP, subject to possession of necessary civil service eligibility and other requirements for the position.

The Order makes the merger subject to prior approvals and clearances under existing laws and regulations, consistent with the GCG’s endorsement.
The Order recognizes that the planned merger and its premises assume that an operational merger between LBP and the Development Bank of the Philippines, previously approved in 2016, will no longer be pursued.
The Order requires coordination in implementation through consultation with the GCG and approvals by relevant regulatory agencies.

Section 5 repeals Sections 2, 4 and 5 of Executive Order No. 198 (s. 2016).
Section 5 further repeals or modifies all other orders, rules, regulations, issuances, or parts thereof that are inconsistent with this Order.
Section 6 provides separability: if any part or provision is held unconstitutional or invalid, the remaining provisions continue in force and effect.
Section 7 sets immediate effectivity upon publication in the Official Gazette or in a newspaper of general circulation.