New Twist In Panama's Banking Merger

Mike Godfrey, Tax-news.com, New York

14 June 2000

The merger battle for Panamanian bank Primer Grupo Nacional (PGN) has collapsed after one of the bidders pulled out, thereby leaving the way clear for Banco del Istmo, Panama's second largest bank, to take over PGN, following its offer of May 15.

The acrimonious exit from the bidding war of General Investment Company (EGI), owner of the country's biggest bank Banco General, which had made a hostile offer for PGN, came amongst protests that EGI was not allowed to access the books and was thus unable to conduct due dilligence.

Banca del Istmo is now well on track to gain control of PGN, having already received acceptances of 66% of the share capital, and it increased its offer to match the EGI offer after the other bank withdrew.

Defending PGN's decision not to allow EGI access to the bank's accounts, its president Raul Orillac said he had offered EGI public statements but believed market-sensitive information should be held until after a deal. In response Frederico Humbert, president of EGI, said 'My responsibility to safeguard the interests of shareholders, clients and employees does not permit us to continue the process of an offer of $258m. From the beginning of our negotiations, the issue of due diligence has caused difficulties.'

Mr Humbert did stress that the decision to withdraw EGI's offer was not, in fact, tantamount to accusing PGN of having irregular accounts. He also said that EGI was under pressure because Standard & Poor's, the ratings agency, put it on notice of a downgrade over doubts about the merger and the loans that EGI would have to take out if it acquired PGN.

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