George Ty open to further raising stake in MPIC

MANILA, Philippines – GT Capital Holdings Inc. of taipan George Ty is open to increasing its stake in Pangilinan-led infrastructure conglomerate Metro Pacific Investments Corp. (MPIC) if the opportunity arises in the future, officials said over the weekend.

But for now, acquiring a 15.6 percent stake in MPIC through a strategic alliance with the infrastructure company is already a “win-win” deal for both conglomerates as GT Capital would be able to have access to infrastructure investments not only in the country, but also in the Asean region through MPIC, they said.

“Mergers and acquisitions are the feet of growth. We’re looking at bigger investments especially with the country becoming a bigger player in the Asean region,” GT Capital vice chairman Alfred Ty said.

“This is a win-win for both of us and if there’s opportunity in the future, we’re always on the look out for opportunities,” GT Capital first vice president Jose Crisol told The Star.

MPIC announced last Friday a strategic alliance with GT Capital, acquiring a 56 percent stake in GT Capital’s Global Business Power for P22.06 billion.

GT Capital will cede majority control of Global Business Power to MPIC’s Beacon Electric Asset Holdings Inc. but will then enter as a strategic investor in MPIC, acquiring 15.6 percent of the conglomerate for P21.96 billion.

This makes GT Capital the second largest investor in the infrastructure conglomerate as it sets its sights on the growing infrastructure business in the country. Hong Kong based First Pacific will retain a 55 percent stake.

Looking at the broader picture,Crisol said GT Capital has gained access to a broader portfolio through MPIC’s expertise such as infrastructure and water, which is outside GT Capital’s core businesses such as banking, automotive and property.

“It’s not a matter of ceding control but expanding our portfolio. It’s really win-win and it’s really a strategic alliance,” Crisol said.

Furthermore, he said GT Capital could also provide the banking, housing and automotive requirements of the MVP Group should the need arise in the future.

The landmark deal took just a few months to negotiate this year, Ty said.

“It took just a few months,” he said.

He said the trend could also happen among other conglomerates with good relations and synergy.

“It takes a lot of synergy for that to happen and it’s possible for other business groups to move in that direction,” Ty said.

Ty noted it has helped that Manila Electric Co. (Meralco) had already entered into Global Power in 2014, raising its stake to 22 percent from 20 percent initially.

He said there was “relationship building,” with him also sitting previously as an independent director of Philippine Long Distance Telephone Co. (PLDT) and then in MPIC.

MPIC chairman Manuel V. Pangilinan said the transaction is a rare opportunity for the infrastructure giant.

“This investment has strengthened MPIC’s finances and together we will work to accelerate our investment in, and development of, the infrastructure of our country,” Pangilinan said.

For the acquisition of a stake in Global Power, Beacon Electric Asset Holdings has entered into a Share Purchase Agreement with GT Capital to acquire an aggregate 56 percent of the ordinary and issued share capital of the power generation company.

Global Power is the leading power supplier in Visayas with an aggregate 852 megawatts of coal and diesel powered generating capacity at present. The main development project is a 670 MW super critical coal fired plant in La Union, Pangasinan.

COL Financial analysts George Ching and Charles Ang said: GTCAP will be swapping its current 51.3 percent stake in Global Business Power plus an additional P10 billion in cash for a 15.6 percent stake in MPIC valued at P30 billion at P6.10 per share.

For MPIC, the total amount to be received by MPIC from the sale of primary shares (representing 11.45 percent of MPIC’s expanded outstanding shares) to GT Capital amounts to P21.96 billion.

While this could potentially be dilutive to earnings and our FV estimate (since MPIC shares were sold below our FV estimate of P6.86 per share), the acquisition of Global Business Power could offset the dilution.

Note that the implied valuation for the transaction which values Global Business Power at P39.4 billion is 20.6 percent lower than our FV estimate valuation of P49.6 billion.”