MANILA - Lopez-led First Philippine Holdings Corp. (FPHC) chose to divest its 6.7%, or half of the remaining, stake in Manila Electric Co. (Meralco) to the PLDT group. The transaction, worth about P22.4 billion, can be completed up to March next year.
During the FPHC board meeting Thursday, PLDT affiliate Metro Pacific Investment Corp. (MPIC) exercised its right-of-first-refusal and matched the P300 per share offer of TriRatna Holdings Corp.
TriRatna is led by Henry Sy, Jr., the son and namesake of the country's richest man.
The right to the additional Meralco shares ups PLDT Group's stake to 41.4%. MPIC has an existing 14.7% and PLDT unit, Piltel, has a 20% stake in the power company.
The FPHC decision, however, has not put to rest the battle for control of Meralco. San Miguel Corp., a major Meralco shareholder and ally of TriRatna, had claimed that it has up to 47% stake in the power firm.
The offer of TriRatna, made last Friday when PLDT and FPHC were on the last stretch of their talks, essentially increased the deal price for the PLDT group of between P1.5 billion and over P8 billion.
Previously, PLDT was considering to buy FPHC's stake at only P150 to P280 per share.
The transactions between MPIC and FPHC followed the process in the investment and cooperation agreement between the two parties signed last March 13, 2009.
MPIC, which has previously acquired the nod of its shareholders for less than the P300 price per share, has up to March 31, 2010 to decide whether to push through with the purchase or not.
MPIC has a call option on 74.7 million Meralco shares, which is equivalent to approximately 6.7% of the outstanding common shares of Meralco. A call option gives the buyer the right, but not the obligation, to buy the shares.
As a sweetener, however, MPIC advanced half or P11.2 billion of the P22.4 billion deal price through a short term loan to FPHC.
The loan, which will mature to coincide with the March 31, 2010 deadline of the call option, will have an interest of 5% per annum. It will be secured by Meralco and First Gen shares.
Happy with PLDT
In a statement, FPHC Chairman Oscar Lopez said: "We are very happy with the agreement reached with [PLDT and MPIC chair Manuel] Pangilinan's group. It reflects a valuation that shows the strong growth prospects of Meralco. The proceeds no doubt will allow First Holdings to pursue its new direction and further establish itself in the country as the premier renewable energy provider."
The decision of FPHC to divest additional shares in Meralco was triggered by plans of the Lopez family empire's power generation arm to make additional investments in geothermal power plants.
FPHC president Elpidio Ibanez told reporters after the board meeting that the board decided to divest only half of the firm's remaining 13.4% stake to retain a strategic position in Meralco.
Should the PLDT decide not to pursue the call option, Ibanez said the 6.7% will be open to other intersted parties, including the TriRatna Group, starting March 31 next year.
The advisor to the transaction was Evercore Partners.