BAP firms up sale of PDS stake to PSE

MANILA, Philippines - The Bankers Association of the Philippines (BAP) has firmed up its intent to sell its minority stake in the Philippine Dealing System Holdings Corp. (PDS) to the Philippine Stock Exchange Inc. (PSE).

BAP president Nestor Tan and PSE president and CEO Hans Sicat signed the term sheet for the transaction wherein PSE would acquire BAP’s 28.9-percent stake in PDS.

The PSE currently has a 20.98-percent stake in PDS. PDS is the holding company that owns the Philippine Dealing Exchange Corp. (PDEX), the operator of the fixed income exchange. It also owns the Philippine Depository and Trust Corp. that serves as the depository for equities and fixed income securities.

Tan, who is also president and CEO of BDO Unibank Inc., said the sale of the shares of BAP in PDS to PSE would help shape a better capital markets for the Philippines.

“We welcome this opportunity to bring this deal into completion with the PSE. BAP remains supportive of the goal to have a more efficient financial market through this transaction,” he said.

 Sicat, for his part, said the PSE remains committed to a unified equities and fixed income exchange.

“This occasion underscores our commitment to see a unified equities and fixed income exchange. We remain cognizant of the advantages of this consolidation to capital market stakeholders and the Philippine economy and we hope to realize these benefits the soonest possible 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 would 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.

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

In October 2014, both the BAP and PSE 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 would 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.