DITO / Udenna share swap approved by SEC

As we’ve covered extensively in the past (here, here, and here), Dennis Uy planned to inject most of his Dito Tel assets into DITO CME [DITO 8.39 0.84%] using a stock-swap transaction between DITO and Udenna, where Udenna would buy 80% of DITO’s stock using stock that it owned in the companies that together owned a large portion of Dito Tel’s stock. That entire deal hinged on DITO’s ability to amend its articles of incorporation to raise its authorized capital stock from P2.8 billion to P40.0 billion.

Now that the SEC has granted approval to DITO for the amendment, and “effective” approval to the stock-swap that the amendment supports, the PSE’s approval is the only thing DITO needs to obtain to complete the transaction. The share-swap deal will result in DITO having a 53.46% indirect interest in Dito Telecommunity, with China Tel owning 40% and Chelsea 6.24% (10.4% of Dito Holdings’ 60% stake).

MB BOTTOM-LINE

This is really the final lap of a slow race that started way back in 2018. Once the share-swap takes effect, DITO will become the legitimate majority owner of Dito Telecommunity’s shares through its indirect ownership of the various corporate entities that own shares in Dito Telecommunity. DITO hasn’t had to incorporate Dito Tel’s financial statements into its earnings reports yet because, until the deal is complete, it did not have that majority control. When it gets control, though, DITO will be required to start reporting on Dito Tel as it would any business that is owned and controlled by a company on the PSE, and that will hopefully be the start of the official record that we can use to track DITO’s progress as the country’s third telco.

Instead of sifting through the Zoom transcripts, Powerpoint slide shows, and Dito Tel Facebook posts, we’ll have a consistent and official source of statistics that we can use to evaluate the progress of Dito Tel’s strategies and gauge the effectiveness of the management team’s tactics used in furtherance of those strategies. The swap will also require DITO to conduct stock rights offering to push its public ownership level back up above the minimum threshold to avoid being suspended by the PSE.

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