Metro Pacific to raise stake in Maynilad


Posted at Jun 30 2008 09:07 PM | Updated as of Jul 01 2008 05:07 AM

Metro Pacific Investments Corp. (MPIC) is beefing up its stake in DMCI-MPIC Water Co., the company that owns Metro Manila's west zone concessionaire, Maynilad Water Services Inc.

In an interview on Monday, MPIC president and chief executive officer Jose Ma. Lim said the company would acquire Ashmore Investment Management Ltd.'s 24.2-percent stake and Hong Kong-based First Pacific Co. Ltd.'s 10.3 percent stake in DMCI-MPIC, bringing its total interest to 55.0 percent. The stakes were valued at $140 million and $57 million, respectively.

Of the purchase price of $197 million, he said $157 million would come from MPIC's biggest shareholder, Metro Pacific Holdings Inc. (MPHI), in the form of equity. The balance of $40 million would be settled by interest-bearing advances by First Pacific and MPHI that would be repaid by MPIC's planned private placement proceeds. First Pacific is the parent firm of both MPIC and MPHI.

The transaction is expected to close on July 7, said Lim.

MPIC chairman Manuel Pangilinan said the company wanted to invest in Maynilad because of its potential to grow its customer base and post strong earnings. "The acquisition of First Pacific's and Ashmore Fund's stakes will allow MPIC to consolidate a proportionately greater share of Maynilad profits."

Maynilad is spending P8.0 billion this year to improve its water system, thus, reducing its non-revenue water, which is at 66.0 percent.

In line with its planned acquisitions and future fundraising activities, MPIC said it would hike its authorized capital stock to P12.0 billion from P4.6 billion, consisting of 7.35 billion common shares with a par value of P1 and 5.0 billion preferred shares at P0.01 apiece.

Other investments

Apart from investments in the water utility, MPIC also intends to grow its real estate and healthcare businesses.

Pangilinan said that the company would likely spend P1 billion to increase its holdings in Makati Medical Center and Davao Doctors Hospitals Inc.. MPIC, at present, owns 33.5 percent of Makati Medical and 34 percent of Davao Doctors.

"We are targeting 1,000 beds by yearend and about 5,000 beds in three to five years," he said, noting that its healthcare portfolio already consists of 500 beds.

MPIC is also looking to venture into the mining and agriculture sectors and is eyeing investments in infrastructure.

Pangilinan disclosed that the company is in talks with at least three groups for possible mining ventures. "We are looking at primarily exporting. But the plan is still in the early stages," he said.

As for investments in agriculture, Pangilinan said that the company is interested in planting sugarcane, and possibly rice, but it will all depend on whether or not it can acquire a significant amount of land to make the venture worthwhile.

Analysts laud MPIC move

Although MPIC's acquisition of additional stakes in Maynilad would dilute ownership of its minority shareholders, analysts still lauded MPIC's move to invest in the water utility, whose product enjoys consistent demand.

"The prospects for utilities are bright. MPIC has weighed the risks and has probably brought experts in," said Astro del Castillo, First Grade Holdings managing director.

Jose Vistan, research head at AB Capital Securities, said: "The water utility business looks promising. It's not encountering same resistance like in power." -- by JUDITH BALEA,