PSE-PDex merger expected to push through

MANILA, Philippines -  The Philippine Stock Exchange (PSE) is hopeful it will finally be able to merge the stock market with the Philippine Dealing and Exchange Corp. (PDEx), the country’s fixed income exchange, even as corporate regulators thumbed down the proposal last year.

In a briefing late Friday, PSE president Hans Sicat said they have been updating the Securities and Exchange Commission and have been giving them “new submissions” in relation to their application to finally work out the deal.

He expects to have a “formal signing of the term sheet” related to the deal in the next few weeks. The term sheet would have details of the acquisition.

“We’re working with regulators. We’re constantly updating them. We’re more confident than the last time (that it will happen this time),” Sicat said.

In March last year, the Securities and Exchange Commission (SEC) thumbed down PSE’s request for exemptive relief from the 20 percent limit on ownership of what would supposedly be a unified exchange.

The exemptive relief is a condition for the merger because under the Securities Regulation Code, no single industry or businesss group should own more than 20 percent of an exchange. Thus, the PSE asked for an exemptive relief from the SEC.

The SEC, however, said the PSE failed to present “clear and convincing evidence” that it is entitled to an exemption from the policy behind Section 33.2 of the SRC and its proposed acquisition of PDS will not negatively impact on PDS’ ability to effectively operate in the public interest.

But the PSE and SEC are discussing the matter anew to resolve thorny issues.

The PSE operates the local bourse while the PDS Group operates the PDex, the country’s fixed-income platform and the two exchanges are moving to consolidate to offer additional value to issuers, investors, and other market participants at various levels.

In July last year, the PSE signed a share purchase agreement (SPA) with the Bankers Association of the Philippines (BAP) covering the acquisition of BAP’s shareholdings in PDS.

The PSE and BAP earlier inked a term sheet in October 2014 where both parties agreed, among others, to the P2.25 billion full firm value of PDS. The SPA signed by the parties will lead to the transfer of ownership of BAP’s equity interest in PDS to PSE upon completion of conditions that include regulatory approvals from the SEC. During the annual stockholders’ meeting in May 2015, the shareholders of the Exchange approved the increase to at least two-thirds PSE’s shareholdings in PDS.