FIGHT  FOR  MERALCO  CONTROL  HEATS  UP

MANILA, MARCH 16, 2009
(MALAYA)  BY MYLA IGLESIAS and ALBERT CASTRO - The fight for control of the Manila Electric Company is far from over even after the PLDT group has bought 20 percent of the shares from the Lopez family, Manuel V. Pangilinan, chairman of the telephone company said over the weekend.

The purchase raises the equity of the group headed by Pangilinan to 44 percent, including the 14 percent left of the Lopezes.

Using its power of numbers, the PLDT group flexed its muscles and will assume the seats represented by the 20 percent sold by the Lopezes. Effectively, First Pacific Co., the mother company of all the companies in the Philippines run by Pangilinan, can end up having six seats in the 11-man board.

PLDT, and other subsidiaries of First Pacific will end up having 44 percent of Meralco shares. The telephone company and Piltel, owned by PLDT, bought 10.1 per cent in the open market. The holdings now stand at 30.1 per cent, according to Pangilinan.

The group comes closer to control because it is widely known that the 14 percent left of the Lopezes, will be voted for PLDT. Thus, after the latest transaction is completed, PLDT may have as much as 44 percent of Meralco.

Sources said that Manuel Lopez will remain chairman but a new chief executive officer will be appointed by mutual consent of the Lopez family and the PLDT.

San Miguel Corp., on the other hand, has four seats represented by the 27 percent of Meralco shares it bought from the GSIS and the 10 percent stake from local fund Global Investment 5000, believed to be an SMC ally.

The other government agencies are also known to have given their proxies to SMC. The shares bought from the GSIS have not been fully paid as the agreement was to complete payment in three years. Barely one year has elapsed.

This means that SMC, until fully paid, will rely solely on government proxies to keep the four seats.

Crucial to comfortable control by either First Pacific or SMC is where the Meralco shares held by Land Bank of the Philippines will be sold or to whom it will issue the proxies.

These shares are supposed to have been transferred to a landowner who had matured Land Bank bonds but opted to be paid in Meralco shares. The Land Bank continues to refuse to part with the shares to the landowner.

The case can reach the courts.

This means that pending resolution, SMC and First Pacific or its Philippine subsidiaries will tangle with each other in acquiring the shares held by many other public stockholders.

San Miguel has to complete payment by the time President Arroyo steps down on June 30, 2010. Otherwise, nobody really knows whom the next president will favor in issuing proxies for the unpaid shares bought from the GSIS.

In the event that the Court orders Land Bank to transfer the shares to the landowner who is supposed to be paid with Meralco shares for his Land Bank bonds, the question is who the owner will sell the shares to or issue proxies for.

The fight for the acquisition of the shares will continue in the stock exchange.

With First Pacific’s subsidiaries having 44 percent including the 14 left of the Lopez group, and the 37 per cent held by SMC although as yet unpaid, there remains in the market nearly 30 percent up for grabs.

The shares held by the Land Bank is crucial and may be on the SMC side if they are not transferred to the landowner who swapped his Land Bank bonds for the equivalent value of Meralco shares.

If the shares are transferred, the landowner’s holdings could very well be the swing vote for control. But more shares will have to be bought by the protagonists to create a situation of swing balance.

PLDT unit Piltel bought a total of 223 million shares of Meralco on Friday at P90 per share, equivalent to P20.07 billion. As initial tranche in the transaction, the Lopez group will first issue 22.22 million exchangeable notes to Piltel worth P2 billion through First Philippine Utilities Corp.

The remainder of the transaction is expected to be completed after the completion of several conditions, with the time set until the third quarter of the year.

With the acquisition, Piltel will transfer to Smart its present subscribers for "Talk ‘N Text" service and the licensing of the brand to Smart, including the sale of Piltel’s GSM fixed assets to Smart.

Smart will then issue a tender offer to Piltel’s minority shareholders.

After the transaction, Piltel will serve as PLDT’s vehicle for its Meralco interest.

Meralco is the largest distributor of electricity in the country with a service area spanning 9,337 square kilometers, where approximately a quarter of the country’s total population resides. It has a customer base of about 4.5 million.


Chief News Editor: Sol Jose Vanzi

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