Alvarez ups Philphos bid to P3.025 B

Businessman Jose Ch. Alvarez was the lone bidder at yesterday’s public auction for Philippine Phosphate Fertilizer Corp. (Philphos) where he offered to buy the company for P3.025 billion, up from his original bid of P2.5 billion.

Alvarez’s Delphi Holdings Inc. was the only investor group that showed up at the second bidding for Philphos after the Asset Privatization Trust declared a failed bid when the company was first offered for sale in October.

Alvarez’s bid was P1 million above the lowest amount the government was allowed to accept for Philphos based on the indicative price of P3.78 billion.

Under the rules, government could accept no more than 20 percent lower than the indicative price which in this case was equivalent to P3.024 billion.

Looking pleased, Alvarez said he preferred the APT’s decision to conduct a second bidding, instead of a negotiated sale. "At least this way, everything is at arm’s length," he said. However, he declined to reveal what he planned to do with Philphos should the Committee on Privatization (COP) award the government’s 45-percent share in the company.

The public bidding was attended by Nauru President Bernard Dowigogo, who said the Nauru government was considering the possibility of either matching Alvarez’s bid or divesting its 50 percent interest in Philphos. "We will wait for the COP decision before we decide," Dowigogo said.

However, Dowigogo denied reports that Nauru was part of the investors in the Delphi consortium, saying only that he has known Alvarez for a long time, since Alvarez is also the incumbent chairman of Philphos.

APT chief executive trustee Renato Valdecantos told reporters that government was "satisfied" with Alvarez’s bid, since it was still above the 20 percent cut off allowed under the government’s privatization rules.

"It is a valid bid even if he is the only bidder," he said. "Our rules allow us to entertain a single bidder since the first bid has failed and this is the second bid." Valdecantos said the APT would be endorsing the bid of Alvarez to the COP when the committee meets tomorrow.

Should the COP accept his bid, Valdecantos said Delphi would have until December 2000 to pay an initial P2 billion for the Philphos shares with the balance payable over the next two years. "These terms are not negotiable," he clarified.

Alvarez, however, refused to explain what changed his mind after saying earlier that he was no longer willing to raise his original P2.5 billion bid for the Philphos shares.

"My only request is that government better return my deposit promptly if they have not reached a decision by Friday," he said.

Alvarez deposited P300 million to APT, equivalent to 10 percent of his bid. At the first bid, he deposited P250 million but this was not returned until two weeks later.

After the first bid was declared a failure and after the collapse of the negotiated sale that followed, Alvarez said P2.5 billion was all the business could afford. "If I am the only bidder I might bid even lower," he said.

According to Alvarez, the peso-dollar exchange rate had driven raw material prices to prohibitive levels. In contrast, the local prices of nitrogen/phosphate/potassium (NPK) fertilizers cannot be adjusted since the farmers’ buying capacity has not improved.

"There is also the inflow of cheap fertilizers from global players like Korea, China and Russia to consider," Alvarez said.

"Generally, business is so bad that our bidding for (the government shares) is a big gamble," he said. "It is our firm belief that this bid is reasonable, considering that return on investments is not certain in the next 7.5 years."

Philphos’ prospects have become even bleaker as Vietnam, its primary export market, gears for the construction of its own phosphate fertilizer plant.

Sources in the Department of Trade and Industry (DTI) told reporters that even when privatized, Philphos would be in "big trouble" because it would soon lose its export market.