The sale of the Lopez family's substantial stake in Manila Electric Company (Meralco) was a "necessary business decision," a leader of the family stressed late Thursday afternoon as response to reports that members of the family are struggling over how the decision was reached.
Oscar Lopez, the family's patriarch, said in a statement that the sale of 20 percent of their previous 34.7 percent stake in Meralco last March 13 was arrived at after thorough discussions.
"It is important to point out that given the magnitude of this decision, senior family members and some key advisors had discussions over the last few months on the future of Meralco and the Group. Eventually, we realized that it was a necessary business decision no matter how painful and difficult it was," Oscar wrote.
In various disclosures to the stock market last March 13, listed companies Meralco, Pilipino Telephone Corp, (Piltel) and Metro Pacific Investments Corp., (MPIC) informed the public of the various deals entered into involving Meralco shares. FPHC and MPIC are part of the giant PLDT Group.
In essense, the Lopez family reduced their stake in Meralco to a mere 13 percent after they entered into a sale agreement with Piltel for a cash purchase of their 20 percent stake. This has substantially made the PLDT Group the single biggest shareholder of Meralco with a total stake of 30 percent. (MPIC has the other 10 percent).
Thereafter, talks have been rife on the circumstances behind how the Lopez family, who has been controlling Meralco for a generation, arrived at the decision. Some of these insights made it to the dailies through columns and a news report.
Coffee talks and the broadsheet items highlighted the rift between Manuel Lopez (Manolo), Meralco's chairman, and Oscar Lopez, who heads the family corporation that sold the 20 percent stake to the PLDT group.
Oscar Lopez explained in his statement that the decision is more than a "family matter." He also admitted that the sale was not easy on his younger brother, Manolo.
"Given how Meralco's history has long been intertwined with our family, acceptance of this sale was not easy, most especially by my brother Manolo, who has invested more than 30 years of his life with the company."
"However, beyond merely just being a family matter, any decision to sell a substantial stake in Meralco ultimately necessitated a proper review and approval by the First Philippine Holdings Board of Directors. The approval was secured in a special board meeting held on March 13, 2009."
The rift between the two Lopez brothers, Oscar and Manolo, emerged as an issue last year, when the Lopez family and Winston Garcia, head of state pension fund Government Service Insurance System (GSIS), were engaged in a bitter public war over control of Meralco.
Manolo was out of the country at the onset of the proxy war in the run up to Meralco's May 2008 annual stockholders meeting. It was Oscar who gave public statements on the family's position--to fight for continuing board control.
In the recent past, however, there have been hints on the brothers' reported rift over the recent sale of a major chunk of Meralco.
A source who was present on several meetings of the Meralco board, which San Miguel president Ramon Ang recently joined as vice chairman, said Manolo Lopez appreciated Ang's many novel ideas to improve Meralco's finances and core business. The source, however, said Oscar Lopez is less impressed. This became evident in succeeding media reports.
Last February, Ang who represents San Miguel, which directly owns 27 percent of Meralco, told President Arroyo during her visit to San Miguel's headquarter, that he had proposed to the members of Meralco board several creative ways to reduce electricity prices--the second highest in Asia.
These ways include improving the efficiency of FPHC's power generation plants, which sell to Meralco. Ang also said he proposed using the power lines of Meralco for the upcoming broadband venture of San Miguel, thus offsetting Meralco's expenses with the additional telecommunications-related income.
The following day, Oscar Lopez attended a general meeting of the Harvard Club of the Philippines where he told reporters that Ang was giving consumers 'false hopes' on the power cost reduction schemes. Oscar described Ang's "promises" as "an impossible task." He cited that Meralco has a pending rate increase petition with the energy regulator, thus electricity rates are likely to increase, not decrease.
Oscar assumed the family helm after his brother, Geny Lopez, who rebuilt the family businesses after the fall of former president Ferdinand Marcos in 1986, died in 1999. Oscar was the family's spokesperson in many issues that befell the Lopezes, including the family's stake in Equitable Bank (now Banco de Oro) and the early part of the decade's concerns on the rising debt of the businesses.
The sale of the family's 20 percent in Meralco to the PLDT Group allowed the family to realize P20 billion in cash, which the First Philippine Holdings Corp. (FPHC) said in their disclosure to the stock exchange will be used to pare down their debts.
The Meralco stake sale was the second deal that FPHC, which Oscar Lopez chairs, had with the PLDT Group. The first was for the sale last year of FPHC's tollroad business to PLDT's unit, MPIC for P12 billion. The amount was also used to reduce the family businesses' billion pesos-worth of debts.
The Lopez group of Companies is one of the country's old rich. It had broadcasting by 1952, power and energy in 1964, cable in 1992, telecommunications in 1994, toll roads in 1995 and water in 1997. But it had to rethink its strategy of pursuing major utilities at the same time since these businesses had longer gestation than they earlier expected. They scrambled for the right debt strategy--asset sales, refinancing, and debt restructuring.
At the time GSIS's Garcia waged a bitter--and personal--war against the Lopezes last year, the cash and debt profiles of the Lopezes kept them from offering to purchase GSIS's 27 percent stake. San Miguel eventually bought GSIS's stake in October through a deal that essentially edged out another interested buyer back then--the PLDT Group.
With the recent turn of events--the San Miguel, PLDT, and Lopez groups holding direct stakes of 27, 30, and 13 percent respectively--speculations among Manila's business circles have been wild that another battle for Meralco's control is in the offing as the May stockholders meeting and board voting near.
Representatives of the three groups, however, continue to douse these speculations and have said they will work together for Meralco's good.
Disclosure: abs-cbnNEWS.com is the online news department of ABS-CBN Interactive Inc., a subsidiary of ABS-CBN Broadcasting Corp. ABS-CBN and Meralco are both part of the Lopez Group of Companies.