MANILA - State pension fund Government Service Insurance System (GSIS) has asked the Philippine Stock Exchange (PSE) to suspend the trading of Metro Pacific Investment Corp. (MPIC) and delist the company for failing to make truthful disclosure of a deal to acquire additional shares in Manila Electric Co. (Meralco).
In an 11-page complaint, GSIS Chief Legal Counsel Estrella Elamparo said that the call option agreement between MPIC and the Lopez family's First Philippine Holdings Corp. (FPHC) was a scheme to skirt the mandatory tender offer rule of the Securities Regulation Code (SRC).
"MPIC's purchase of the 6.7% of Meralco shares of FPHC disguised as a loan cum call option is clearly a device, scheme or artifice calculated to circumvent the mandatory rules on tender offer with no other purpose but to defraud and deceive the investing public," Elamparo said.
On November 5, MPIC and FPHC entered into a call option agreement, granting MPIC the right to acquire additional Meralco shares from the Lopez group in exchange for a P11.2-billion loan. The call option is excercisable until March 31, 2010.
The agreement came shortly after FPHC reportedly turned down an offer of tycoon Henry Sy's son to buy FPHC's Meralco shares at P300 each.
Manuel V.Pangilinan-led MPIC and its sister firm, Pilipino Telephone Corp. or Piltel, together control 34.7% of Meralco, with 14.7% and 20%, respectively.
An additional 6.7% stake in Meralco would increase the group's total holdings in the power firm to 41.7%, well above the tender offer threshold of 35%.
The tender offer rule requires any individual or group who acquires a 35% stake in a listed company within the span of a year to buy out other shareholders at the same price agreed upon with the block seller.
But Pangilinan's group had claimed that only the 20% stake they bought from the Lopez group should be counted in determining if the 35% threshold has been breached since the other 14.7% was bought in the open market.
"It is a manipulative practice or machination with the use of inaccurate, incomplete, misleading and untrue statements by misdeclaring that it acquired 14.7% in the open market when in truth, and in fact, it only bought a limited total of 1.7%," Elamparo said.
Based on an October 6 disclosure, Elamparo said MPIC bought 10.2% of Meralco from the PLDT Beneficial Trust Fund and New Gallant Ltd; 2.8% from Crogan Limited; and only 1.7% in the open market.
"[MPIC wants] to make it appear that it did not breach the 35% threshold which would then compel it to make a tender offer," she stressed.
The GSIS lawyer also cited a November 9 interview of MPIC president Jose Maria Lim where he allegedly admitted that they wanted to acquire Meralco shares from FPHC but were structuring the transaction as a call option.
GSIS has warned that allowing MPIC to continue will give the impression that this PSE turns a blind eye to "such fraudulent, manipulative and unlawful acts" that would result in eroding investor confidence. "It is only fitting that the exchange impose an immediate suspension of the trading of MPIC stocks pending investigation and to, after due consideration, thereafter find MPIC guilty of all the offense charged and consequently impose the ultimate penalty of delisting."
The pension fund has filed 2 criminal complaints before the Pasig City Prosecutor's Office against officials of MPIC and FPHC.
GSIS said MPIC corporate information officer Melody Del Rosario made untruthful statement of facts when she disclosed to the PSE that MPIC's 14.7% stake in Meralco was acquired in the open market.
It also filed a complaint against FPHC corporate secretary Enrique Quiason for refusing to provide the pension fund with company records and documents pertaining to FPHC's call option agreement with MPIC.
"The respondents' refusal and failure to comply with the complainant's request is tantamount to an unjustified denial of complainant's stockholder's right to inspect FPHC's corporate books/records in violation of Section 74 of the Corporation Code," the GSIS stated.