MANILA, Philippines - Investors snapped up stocks of power distribution giant Manila Electric Co. (Meralco) yesterday in anticipation of a heated bidding war among the major shareholders, particularly with the eldest son of the country’s richest man joining the fray.
In a surprise move late last week, Henry Sy Jr., through privately-held company Triratna Holdings Corp., offered to acquire the remaining 13.4 percent stake in Meralco owned by the Lopez family for P300 a share, translating to a total purchase price of P44.75 billion or $940 million.
Meralco shares reached a two-week high of P223 in intra-day trade yesterday before leveling to close 13.3 percent higher at P213. Meralco has a market capitalization of P209.6 billion.
Sources said Triratna’s bid trumped an earlier offer made by the PLDT Group of Manuel Pangilinan, spicing up the race for control of the country’s largest power distributor.
Sy’s offer came just a few days after the Lopez family and the Pangilinan-led group separately disclosed they were in talks for the sale of half of the Lopezes’ 147.4 million shares in Meralco, and that a deal was expected to be consummated this month.
But Pangilinan, who chairs both PLDT and Metro Pacific Investments Corp. (MPIC), indicated yesterday that they are carefully studying their options - either matching the Triratna offer or exercising their “tag-along rights.”
The tag-along rights, which both PLDT subsidiary Pilipino Telephone Inc. (Piltel) and MPIC have, means that either or both Piltel and MPIC can put up their shares in Meralco for sale together with that of the Lopezes on the same terms and conditions. In turn, the Lopezes also have both the right of first refusal and tag-along rights in case the PLDT Group sells its stake in Meralco.
“We will do what’s best for PLDT and Metro Pacific. But we are taking a long-term view of Meralco. We believe it can have an exciting future,” Pangilinan emphasized.
Sy, the president of Triratna, said the move reflects the group’s “confidence in the future prospects of the power sector in general and Meralco in particular.”
But Sy, son of retail tycoon Henry Sy Sr. of the SM Group, is widely perceived to be an ally of diversifying food and beverage conglomerate San Miguel Corp., which earlier signified its intention to acquire the Lopezes’ shareholdings in Meralco under First Philippine Holdings Corp.
Triratna was among those pre-qualified to bid for the 25-year concession of power grid operator National Transmission Corp. (TransCo) in 2006. Aside from the Sy family, the other major shareholders of the private firm during the time were San Miguel Corp. president Ramon S. Ang, Joselito Campos of Unilab and foreign partners Newbridge of the US and Tenaga National Bhd. of Malaysia.
The younger Sy, however, distanced himself from the San Miguel Group, saying Triratna will be majority owned by him after it completes the buyout of its original partners.
The Lopez Group, one of the country’s most powerful dynasties, would discuss Triratna’s offer at a board meeting on Thursday.
The Pangilinan-led group, which has the right of first refusal on the contested block, currently holds 34.7 percent of the power utility giant through Piltel’s 20 percent stake and infrastructure holding firm MPIC’s 14.7 percent. The group’s principal is Hong Kong-based conglomerate First Pacific Co. Ltd., owned by the Salim family of Indonesia.
The PLDT Group’s decision to exercise its right of first refusal would subsequently trigger a mandatory tender offer to the other shareholders.
Under the Securities and Exchange Commission’s tender offer rule, an entity that acquires 35 percent of a listed company must buy the remaining shares held by minority shareholders at the same price.
San Miguel, which has been diversifying from the food and beverage markets it dominates to power, toll roads, and telecommunications, owns 27 percent of Meralco. Together with ally Global 5000 Investments Inc., the San Miguel Group holds a total of 34 percent in the utility giant.
Observers note that all will depend on whether the two First Pacific subsidiaries consider P300 per share for Meralco a worthy investment. PLDT and MPIC can choose not to match the Triratna offer, in which case their combined Meralco stake will remain at 34.7 percent. Not matching the offer, however, can tilt the balance of power in Meralco in favor of the San Miguel Group.
Pangilinan also pointed out that both First Pacific and MPIC have expressed their intention to buy more shares in Meralco, so that their stake would equal that of PLDT’s 20 percent. This means MPIC can still acquire up to 5.3 percent of Meralco.
While Pangilinan would not say what are the plans of PLDT as far as Piltel’s shares in Meralco are concerned, he noted that the synergies being worked out between PLDT and Meralco would be useless if PLDT sells its stake.
He admitted that Sy’s offer came as a surprise to them. “But of course, it is within his prerogative,” he said.