MANILA - There is no merger in the proposed ABS-CBN Corp investment in MediaQuest which operates TV5 based on the Revised Corporation Code, the Securities and Exchange Commission said Wednesday.

However, Congress can look into the issue of controlling interests to determine whether further approval is needed, SEC general counsel Romuald Padilla said during a Congressional hearing.

The House Committee on Legislative Franchises is holding a joint hearing with the Committee on Trade and Industry on the proposed ABS-CBN investment in TV5.

ABS-CBN and TV5 announced an investment agreement where the Lopez-led firm will acquire 6,459,393 primary (new) common shares in TV5 equivalent to 34.99 percent of the total voting and outstanding capital stock for an aggregate subscription price of P2.16 billion.

TV5 will hold 64.79 percent of the total voting and outstanding capital stock and the MediaQuest group remains as the controlling shareholder of TV5.

PLDT Inc Chairman Manny Pangilinan earlier clarified that the deal is a joint venture and not a merger.

Several lawmakers including SAGIP Partylist Rep. Rodante Marcoleta, however, argued that the deal could also be construed as a merger.

"In relation to the agreement, while the SEC is of the view that there is no merger between TV5 and ABS-CBN under the provisions of the Revised Corporation Code," Padilla said.

"The Commission suggests, however, that the matter in controlling interests be looked into by the Congress, and in this regard the Commission will defer to the Congress what constitutes controlling interest in determining whether there is a need for its prior approval as mandated in its franchise law," he added.

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On this issue, Padilla cited the Convertible Note Agreement entered by the 2 parties simultaneously with the investment deal wherein ABS-CBN will invest in a Convertible Note with a face value of P1.84 billion to be issued by TV5.

The Convertible Note will allow ABS-CBN to acquire additional primary common shares of TV5 after 8 years and increase its equity to 49.92 percent.

Padilla said if this is completed, TV5 will have to explain to lawmakers how it would comply with the mandatory offering of 30 percent of its outstanding capital stock to the public.

Padilla also stressed that these findings were a result of an initial evaluation given the limited time before Wednesday's hearing.

The National Telecommunications Commission on Wednesday said ABS-CBN and TV5 should secure government clearances including the Bureau of Internal Revenue and the local government units before the investment is approved.

Meanwhile, TV5 and ABS-CBN on Wednesday put the investment deal on hold to address the issues raised by several lawmakers and the NTC.

Both ABS-CBN and TV5 maintained that the deal would have a favorable impact on the Philippine media.

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