Meralco’s minority shareholders told not to bank on tender offer
By Kristine Jane R. Liu, BusinessWorld | 10/20/2009 12:59 PM
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MANILA - Analysts are warning minority stockholders in Manila Electric Co. (Meralco) not to expect a buyout anytime soon as the PLDT group and San Miguel Corp. may go around "tender offer" rules even if one of them takes sole management control.
With both camps openly expressing intentions to secure a majority of the country’s top power distributor, investors have flocked to Meralco shares, sending the stock price to record highs of P302.50 apiece in July before going down to as low as P166 last month.
Yesterday, shares in the power distributor shot up anew after Hong Kong-based First Pacific Co. Ltd. reiterated that its local unit Metro Pacific Investments Corp. seeks to increase its 14.7% stake.
"The company’s Philippine affiliate, Metro Pacific, has previously stated that it intends to seek to increase its shareholding in Meralco to not less than a 20% interest and is in discussion with various parties with the intention of achieving that objective," First Pacific told the Hong Kong stock exchange.
Following the statement, Meralco shares jumped by 6.56% or P13 to close at P211 apiece. It was the most actively traded stock, with 1.64 million shares worth P338.85 million changing hands.
"The news is already old. But when investors see Metro Pacific Chairman Manuel V. Pangilinan saying it again, they tend to react," Joseph Roxas of Eagle Equities, Inc. said.
"Maybe [the sale of additional Meralco shares to Mr. Pangilinan] is already coming," he added.
Philippine Equity Partners, Inc. however warned minority shareholders not to take anybody’s words hook, line and sinker especially on the issue of a tender offer.
"We caution that Meralco minority shareholders should not readily expect to get taken out via a tender offer as certain structures can be used to circumvent the spirit of the law. Meralco remains expensive and is a sell," the brokerage house said.
Under the rule, any group or person acting in concert and acquires a 35% stake in a listed company, or a 15% stake in a single transaction, should offer to buy the shares of minority shareholders at the same price it had purchased shares from the publicly listed firm.
"The law is clear when it said individual or group. When San Miguel and Global 5000 Investments, Inc. [bought a combined 37%] stake in Meralco, that should have already triggered a tender offer," Mr. Roxas said.
San Miguel acquired a 27% stake in the power distributor from pension fund Government Service Insurance System last year. An ally, Global 5000 Investments, is said to control up to 10%.
"The implementation of the law depends on the Securities and Exchange Commission," Mr. Roxas said, pointing out that if the San Miguel camp was able to skip tender offer rules, so will the Pangilinan group.
The Pangilinan group holds a combined 34.7% stake in Meralco through Metro Pacific (14.7%) and Pilipino Telephone Corp., a unit of the Philippine Long Distance Telephone (PLDT) Co. (20%). First Pacific partly owns PLDT.
Lopez-led First Philippine Holdings, Inc., which holds a 13% stake, had said it would sell its Meralco shares to the highest bidder. For now, the Lopezes are voting with the Pangilinan group on the Meralco board.
"At P211, Meralco remains expensive [and] is already considered a speculative stock. I do not think any of [the groups] will buy out the minority shareholders because the corporate regulator will not enforce it," Mr. Roxas said.
Jun B. Calaycay of Accord Capital Equities Corp. said that while the market widely believes that the fight is only between Mr. Pangilinan and San Miguel, it is still hard to enforce the law on them "simply because of what the market thinks."
"What has to be established is the relationship of the companies to one another and whether they are acting in concert. The best entity to answer that is the exchange," Mr. Calaycay said.
Mediaquest Holdings, Inc., a unit of the PLDT Beneficial Trust Fund, has a minority stake in BusinessWorld.
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