SMC raises P17B from sale of 5.7% stake in Meralco
Conglomerate San Miguel Corp. has raised P17.4 billion from the sale of an initial 5.7-percent stake in utility Manila Electric Co. to the open market.
In a disclosure to the Philippine Stock Exchange Friday, SMC said it had unloaded 64.33 million shares of Meralco at P270 each in a placement deal arranged by Deutsche Bank AG Hong Kong branch and Standard Chartered Securities (Singapore) Pte. Ltd.
The transaction pared down SMC’s interest in Meralco to 27.1 percent from 32.8 percent.
SMC said an application for the block sale of the shares was filed at the PSE on Friday. The transaction is subject to customary closing conditions and regulatory approvals.
The shares were offered to the market through a book-building process over the past few days. SMC announced plans to sell all or part of its Meralco stake in early June, citing good offers from prospective investors.
But while SMC’s stake is a sizable block, it does not represent the controlling interest in the utility, which means buyers will become passive investors. The First Pacific group of Hong Kong led by businessman Manuel V. Pangilinan has management control of Meralco.
The share-sale was priced at a 10.7-percent discount to Thursday’s closing price of P302.40. As such, shares of Meralco slumped yesterday to track the discounted pricing of the block transaction.
SMC acquired the interest in Meralco in 2009 from state-owned pension funds at P90 each.
“On the positive, the sale raises a significant amount of capital for SMC that can be used to finance Naia (Ninoy Aquino International Airport) toll road project or the PAL (Philippine Airlines) acquisition. However, the returns, valuations and block size appear to be less than expected,” said Jose Mari Lacson, head of research at local stock brokerage Campos Lanuza & Co. “We estimate that the compounded annual return on that block was slightly above 40 percent, which is quite substantial. However, the dividends alone from Meralco would suggest they could have gotten more in terms of pricing.”
SMC had indicated that it was willing to pare down its interest in all core businesses—from food to power generation—but will keep a 51-percent simple majority control in each. Proceeds from the prospective sale are seen adding to funds to acquire new businesses with a good cash flow and potential for future growth.