MPIC, DMCI to bring Marubeni into Maynilad
MVP group likely to keep majority control of firmBy Doris C. Dumlao
Philippine Daily Inquirer
The consortium of Metro Pacific Investment Corp. and DMCI Holdings Inc. wants to bring into the fold Japanese trading giant Marubeni as a strategic partner in Maynilad Water Services Inc.
Industry sources confirmed that Maynilad’s two shareholder groups—MPIC and DMCI—were currently in talks with Marubeni for what could turn out to be a multibillion-peso buy-in deal to boost the water concessionaire’s expansion efforts.
The sources said that the two companies were willing to have their respective stakes diluted, but MPIC, led by businessman Manuel V. Pangilinan, would still like to keep majority control of the water concessionaire, whose turnaround story had attracted some serious investors.
In reply to the Inquirer query on the prospective entry of Marubeni, MPIC chief finance officer David John Nicol said: “We have been going through a lot of discussions with foreign investors interested in Maynilad because of [its] excellent operational performances. But nothing has been finalized.”
The DMCI-MPIC Water Co. is a 55-45 joint venture that has a 92-percent stake in Maynilad, with MPIC owning the majority bloc.
Other industry sources familiar with the discussions said members of the consortium were willing to share control of Maynilad to a third party like Marubeni.
To acquire 100 percent of Maynilad, the “asking price” was reported to be $2.2 billion (P94.5 billion).
The price is 15.5 times the P6.01 billion core net profit of Maynilad in 2011. Based on recent discussions, the consortium may be willing to sell close to a 20-percent stake to a prospective foreign partner which, based on the “asking” price, could be worth over P18 billion.
Stock market sources said the robust trading on MPIC and DMCI shares in recent weeks was partly due to expectations that the two infrastructure holding firms would unlock good values out of Maynilad.
But other sources have expressed caution, saying that if any deal were to be finalized, the “asking price” would still be subject to haggling.
Maynilad’s publicly listed peer Manila Water Co., which is owned by the Ayalas, is currently trading at less than 11 times its earnings last year with market capitalization of about P46 billion.
The sources added that DMCI would likely tolerate a bigger dilution with the prospective entry of a strategic partner like Marubeni.
“I think they’ve reached that stage that they want to have a strong strategic partner to reduce their NRW (non-revenue water) ratio,” said a veteran stock analyst.
Although the consortium has improved operations since it took over Maynilad from the Lopezes in 2007, the water concessionaire still wants to boost its financial muscle to fast-track the reduction in NRW ratio resulting from leakage and theft.
Since the new consortium took over, Maynilad’s NRW has gone down from 68 percent to 42.2 percent as of last year. But this is still high compared with Manila Water’s 11.2 percent NRW ratio.
Asked about the strategic benefit of Marubeni potentially buying into Maynilad, Campos Lanuza & Co. head of research Jose Mari Lacson said: “They can expand outside like Manila Water and have access to new technologies and possibly Japanese bank financing.”
Maynilad covers the West Zone of Metro Manila and a large part of Cavite province. The number of billed customers rose by 11 percent to over a million at the end of 2011 from 903,682 a year earlier. Total revenue in 2011 grew by 14.3 percent to P13.77 billion from the previous year.
On the other hand, Marubeni has been operating in the Philippines for the last 100 years through its wholly owned subsidiary Marubeni Philippines Corp. It has operations in import, export and offshore trade, turn-key project management, risk management, finance and logistics.