LOPEZ VS GOVT: GSIS TAKES PROXY WAR ROUTE IN BATTLE FOR MERALCO
MANILA, May 19, 2008 (STAR) By Zinnia Dela Peña - The Government Service Insurance System (GSIS) is raising the ante in a high stakes battle for control of the country’s largest power distributor by taking the proxy war route.
GSIS, which holds about 23 percent of Manila Electric Co. (Meralco), has been actively soliciting proxies from shareholders, including brokers to maximize support for its proposal or causes in the run-up to the utility giant’s annual meeting scheduled on May 27.
Veteran stockbroker and former Philippine Stock Exchange chairman Vivian Yuchengco said the GSIS sought her help in soliciting proxies.
“I was asked to get proxies long ago. I helped him (GSIS head Winston Garcia). He is a valued client but I would do the same for other valued clients,” said Yuchengco, managing director of First Resources Management & Securities Inc.
She, however, pointed out that she was not fighting with the Lopezes whom she described as “personal friends.”
“It’s a hard battle but it’s for us three million Meralco customers,” said Yuchengco, who is known to be a government ally.
Sources said stockbroker-businessman Robert Coyiuto himself is soliciting proxies for the Lopez group whose businesses are reportedly insured by the Coyiuto group.
The Lopez group is also preparing for what is seen as a tumultuous battle for control of the country’s largest power distributor.
The government holds a 32 percent stake in Meralco, including the combined shareholdings of PhilHealth, Land Bank of the Philippines, Social Security System and Pag-IBIG Fund.
The ongoing squabble between the GSIS and the Lopez family has hurt the share price of Meralco, which is now down to P69.50 per share from P81 at the start of the month.
“The GSIS is compelled to take its case directly to the shareholders, including the initiation of a proxy contest to effect changes in the board of Meralco,” said a source who requested anonymity.
By launching a proxy fight for Meralco, GSIS gets to bring its offer past the resisting board of the utility firm and into the laps of shareholders.
In the past two months, GSIS has been accumulating shares of Meralco as it seeks to beef up its presence in the 11-man board.
With the contending parties each holding around one-third of Meralco, up for grabs is the remaining 35 or 36 percent stake currently owned by the public.
The government currently has four seats in the 11-man board while the Lopez family owns five seats. The two other seats are reserved for independent directors.
The GSIS, sitting on huge pile of cash, earlier said it is ready and willing to buy out the shares of the Lopez group in Meralco to effect changes in the way the company is being run.
As he denied claims he is out to take over Meralco, Garcia demanded full transparency and accountability in the operations, transactions and contracts entered into by the utility giant for the benefit of millions of its customers.
“We are not intending to take over Meralco. We are only after change of management so that fairness can be done to the shareholders and fairness can be given to the consuming public,” Garcia earlier said.
Government employees, however, strongly objected to GSIS’ planned takeover, saying such move would result in the monopoly of power distribution by government cronies.
They also doubted whether such a plan would bring down high electricity costs.
They also questioned the GSIS’ move as it exposes the pension fund to significant losses.
The GSIS reportedly acquired some of its Meralco shares at around P80.91 per share.
Meralco, for its part, denied it has not granted Garcia’s request for access to corporate documents, pointing out that management has been very careful in complying with the law with respect to the right of a director or stockholder to examine its records.
Christian Monsod, a director of Meralco and senior consultant to the chairman, said management has repeatedly invited Garcia to review the documents he has requested at the company premises anytime during office hours and has even provided him copies, although the law does not require it.
He said management has offered to give him a full briefing and this is being scheduled at his convenience.
The rift between Garcia and the Lopez family stemmed from the alleged refusal by management to heed his request for copies of financial statements and commercial transactions made by Meralco.
The pension fund is awash in cash following the divestment of its shares in blue chips San Miguel Corp., Philippine Long Distance Telephone Corp. and Ayala Corp. last year.
‘Way off mark’
Meanwhile, Estrella Elamparo, GSIS chief legal counsel, yesterday described as “way off mark” the claim of Antonio Tinio, chairman of the Alliance of Concerned Teachers (ACT), that GSIS is motivated by “cronyism” in seeking to lower the electricity charges of Meralco.
She also dismissed allegations that Garcia or any member of his family were involved in the Visayas Electric Co., which holds the franchise to distribute electricity in Metro Cebu.
Elamparo also decried claims that GSIS is using its members’ pension fund to purchase Meralco stocks to bolster its shareholding in the firm.
“What we have used for the purchase of Meralco stocks, in accord with GSIS policy to invest in profitable business enterprises, are the investible funds from which we still have around $5 billion,” Elamparo said.
She said GSIS was able to acquire 23 percent of Meralco’s outstanding stocks in accordance with its policy to expand funds through sound investment.
To meet or not to meet
In Malacañang, Deputy Presidential Spokeswoman Lorelei Fajardo denied reports that a one-on-one meeting between President Arroyo and Meralco chairman and chief executive officer Manuel Lopez was set tomorrow to settle differences over the administration’s efforts to pin down the power utility firm over alleged overpricing of its rates.
Fajardo described reports of a meeting in Panglao, Bohol as “simply speculative” and that the trip of the President to Panglao is principally to conduct the Cabinet meeting.
“The President’s schedule does not allow for such a private meeting,” Fajardo said in a statement, adding the Cabinet meeting would tackle mainly local issues, particularly Bohol’s economic opportunities.
Chief Presidential Legal Counsel Sergio Apostol, however, said it was the Lopezes who have been seeking the meeting and not Malacañang. – With Paolo Romero
Chief News Editor: Sol Jose Vanzi
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