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SMC boss sues top GMA exec for estafa

GMA7’s chair and CEO Felipe Gozon INQUIRER FILE PHOTO

GMA 7’s chair and CEO Felipe Gozon. INQUIRER FILE PHOTO

An aborted deal to buy into broadcasting firm GMA Network Inc. has turned into a legal battle as the prospective buyer, San Miguel Corp. (SMC) chief executive officer Ramon S. Ang, now seeks to recover P1 billion in down payment.

Ang, also SMC president, has filed in the Department of Justice syndicated estafa charges against GMA chief executive officer Felipe L. Gozon, members of his family, and other stockholders and officers of the broadcast giant.

A nonbailable offense, syndicated estafa requires five respondents.

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In a complaint dated July 27, Ang accused Gozon, also GMA chair, and his group of failing to return and of misappropriating a portion of the P1-billion down payment Ang gave during the negotiations for his acquisition of a 34-percent stake in GMA.

Other GMA owners—Menardo R. Jimenez and Gilberto R. Duavit Jr. (president and chief operating officer) and their groups—were not included in the charges after indicating their intention to return their portion of Ang’s P1 billion.

Aside from the Gozon patriarch, also charged were his family members constituting the Gozon group, namely Felipe M. Gozon Jr., Anna Teresa Gozon-Abrogar and Ismael Augusto S. Gozon.

Other respondents to the case were GMA executives Belinda G. Madrid, Ma. Erlinda G. Gana, Jaime Javier Gana, Florencia Gozon Tarriela, Edgar Tarriela and Tricia T. Valderrama.

Asked about the estafa charges, the Gozon group said, “We have not received a copy of the complaint. Our legal counsel will respond accordingly in due time.”

Initial deal

Around June last year, Ang hatched a deal to acquire an initial 30-percent stake in GMA for about P15.3 billion.

Ang agreed to buy into GMA at P10.60 per share. Based on a total count of 4.86 billion common shares—including 3.36 billion common shares plus the 1.5 billion convertible preferred shares that have five times more voting rights than common shares—the pricing of P10.60 per share gives GMA a total enterprise value of about P51 billion.

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After buying an initial 30-percent stake, the plan was for Ang to acquire more shares and eventually gain control of GMA.

While already resigned that the deal would not push through, Ang now wants the P1-billion down payment returned. A few weeks ago, he was still hopeful that the families behind GMA would be talked into returning his money.

Last recourse

Insiders say that Ang was the type of businessman who would typically resort to lawsuits only as a last recourse. In this case, the filing of a lawsuit suggested that all hopes of recovering the money through negotiations had failed.

Ang, in his complaint, accused the respondents of the crime of estafa by misappropriation or conversion under Article 315, paragraph 1 (b) of the Revised Penal Code.

“The purchaser (Ang) did not agree that the down payment could be used for any other purpose, much less as security to answer for any claims for damages, which the Gozon group would be minded to make later on,” the complaint stated.

“Assuming that the respondents have ‘causes of action’ or ‘claims for damages’ against the complainant, they cannot just take the law into their own hands and retain the complainant’s money to answer for such claims, for the simple reason that the money was not given to them for that purpose,” it said.

“Using the money for that different purpose is misappropriation or conversion. They have to immediately return the P1 billion to the buyer and then, if they want, file an action for damages against [the] buyer in the proper court.”

According to the complaint, Ang and the groups of Gozon, Jimenez and Duavit agreed to negotiate for Ang’s purchase of a 34-percent stake in GMA held by the three groups, with certain rights to participate in the management of the company.

Tag-along rights

Ang, who entered into the negotiations in his personal capacity, said the Gozon, Duavit and Jimenez groups in GMA had a sale agreement in which each group has “tag-along rights,” or the right to participate, in case the other groups would sell their respective shares to a third party.

The negotiation terms were contained in the term sheet, or summary of principal terms and conditions relating to the sale and purchase of equity shares in GMA Network. The term sheet was signed by Gozon and representatives of the Jimenez and Duavit groups, and was dated June 23, 2014.

Exclusivity period

“The term sheet was essentially an ‘agreement to agree,’ which imposes on the parties the obligation to negotiate in good faith during exclusivity period the terms of the definitive agreement (i.e., the transaction documentation) for the sale of the shares in GMA Network,” Ang said.

He said the sale could not proceed until agreed upon by all parties.

Check payable to Gozon

In accordance with Clause 8 of the term sheet, Ang deposited a down payment of P1 billion with the sellers through a manager’s check payable to Felipe L. Gozon who shall hold the money in trust for the other major shareholders.

The parties also agreed that in the event the terms and conditions of the transaction documentation were not finalized and concluded by the parties within the exclusivity period, the down payment shall be returned to Ang not later than three working days from the end of the period without need for any further notice or demand.

Expiration

When the exclusivity period expired on Nov. 19, 2014, Ang said the down payment should have been returned by the GMA owners.

“Respondent Felipe L. Gozon and the rest of the sellers did not return the P1 billion to the complainant by 19 November 2014. Instead they continued to negotiate with the complainant,” Ang said.

Several months passed and the parties were still unable to agree, finalize, conclude and execute the transaction documents, so Ang informed the GMA owners on March 26 that he was constrained not to proceed with the transaction.

Ang said he expressed willingness, if the owners so desired, to revive the discussions provided they “revisit the underlying assumptions and parameters of the transaction given the change in circumstances.”

New condition

Ang said negotiations continued after March 2015 but this was no longer under the original term sheet. This time, the proposal was for Ang to purchase all of the Gozon shares ahead of those of the Jimenez and Duavit groups.

Ang said he sent an e-mail on May 18 to GMA owners noting certain “key issues” based on the initial review of the draft agreements from the owners and the latest communications between the parties. However, on June 22, the owners sent a reply abruptly terminating the negotiations.

In the June 22 letter sent through their counsel, the respondents said they were withdrawing their offer of the sale of the Gozon shares. The respondents also urged the parties to proceed with the purchase of the shares of all the major shareholders by Ang, adding that they were no longer open to a renegotiation of the terms already agreed upon by the parties.

Ang, through his own counsel, replied on June 24, disputing the allegations that he breached his obligations under the term sheet or under the law. He also rejected the owners’ further overtures and demanded the return of his P1-billion down payment within three working days.

The GMA owners’ counsel replied on June 29, reiterating that Ang breached his obligations under the term sheet and that Gozon would retain the down payment to answer for his group’s case of action against Ang, including claims for actual or compensatory damages, loss of opportunity to earn profit, and other costs and expenses.

The Jimenez and Duavit groups, however, agreed to return their share of the P1 billion, hence, Ang’s complaint was limited to the Gozon group.

Pangilinan, convergence

The families behind GMA had engaged in discussions with potential sellers several times in the last two decades, each instance of which failed.

Apart from Ang, the group of businessman Manuel V. Pangilinan through PLDT Beneficial Trust Fund had nearly sealed a deal with GMA, the last round of which broke down in 2012 due to what was believed to be sellers’ refusal to absorb some of the regulatory risks.

Ang is believed to be interested in GMA to enter the “convergence play” given that SMC, where he is now the single biggest stockholder, has an equity interest in publicly listed Liberty Telecoms Holdings Inc. as a partner of Quatar Telecom.

Outside of its partnership in Q-Tel, SMC also controls Bell Telecommunication Philippines Inc. and Eastern Telecommunications Philippines Inc.

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TAGS: acquisition, acquisition negotiations, Anna Teresa Gozon-Abrogar, Belinda G. Madrid, Business, courts, crime, criminal complaint, Department of Justice, downpayment, Edgar Tarriela, Felipe L. Gozon, Felipe M. Gozon Jr., Florencia Gozon Tarriela, Gilberto R. Duavit Jr., GMA, GMA 7, Ismael Augusto S. Gozon, Jaime Javier Gana, Justice, Law, litigation, Ma. Erlinda G. Gana, Menardo R. Jimenez, Ramon S. Ang, Revised Penal Code, San Miguel Corp., syndicated estafa, trials, Tricia T. Valderrama
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