Gokongwei buys 27% stake in Meralco
The Gokongwei group has struck a deal to buy the remaining 27.1-percent stake in Manila Electric Co. held by the San Miguel group.
In separate disclosures to the Philippine Stock Exchange Monday, conglomerates San Miguel Corp. and Gokongwei-led JG Summit Holdings Inc. said they have agreed on the transaction subject to closing conditions mutually agreed upon by the parties. None of the terms was disclosed even as the stock market was eager to know how much the block was priced.
The SMC group’s 27.1-percent stake in the country’s biggest power distributor is valued by the market at P83.7 billion based on Monday’s closing price.
In a text message, SMC president Ramon Ang said the conglomerate and its subsidiaries had sold all of the remaining shares in Meralco, thereby completing its divestment from the utility firm, whose controlling stockholder is the group of businessman Manuel V. Pangilinan.
Ang declined to say how much SMC had agreed to sell the shares. However, Meralco surged 4.38 percent Monday to close at P286 a share after the disclosures on the JG-SMC deal. However, shares of buyer JG Summit fell 1.78 percent while those of seller SMC rose 0.4 percent to P74.80.
“Shares of Meralco rose because this removes the overhang from a significant investor who wants to sell. Investors can now go back to trading Meralco based on fundamentals,” said Jose Vistan, head of research at AB Capital Securities. Even if SMC sold the shares at P250 or lower, Vistan said Meralco’s shares would have “nowhere to go but up” following the deal.
For JG Summit, he said it would be a question of how the conglomerate would pay for the stake. “The impact is neutral initially on JG but for them to be able to include Meralco in their portfolio, it’s positive. It’s a company with a virtual monopoly in Metro Manila’s power distribution and is diversifying into power generation. I just hope they got it at a good price, which is probable, given that SMC had wanted to sell.”
The Gokongwei group, an ally of Pangilinan by virtue of their partnership in local telecom giant Philippine Long Distance Telephone Co., had long been speculated to be interested in investing in Meralco. The deal ensures that a friendly party will join Pangilinan in Meralco’s boardroom.
“JG Summit has sufficient cash flow coming from the dividends of PLDT. This enhances its borrowing power considerably. Add to this the potential proceeds from a secondary offering of Robinsons Retail. All in all, they can borrow to buy the stake,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.
But Lacson agreed that the main question was valuation, adding that if JG Summit were buying Meralco shares below P236 a share, this would be advantageous in terms of returns.
Meanwhile, SMC’s divestment from Meralco is seen boosting funds for diversification into other infrastructure projects, particularly those where it exercises management control.
In its disclosure, SMC said it had mandated Credit Suisse as its sole financial adviser for the Meralco transaction. The conglomerate said it was selling its stake together with those held by units San Miguel Pure Foods Co. Inc. and SMC Global Power Holdings Inc.
Last July, SMC raised P17.4 billion from the sale to the open market of an initial 5.7-percent stake in Meralco at P270 each in a placement deal arranged by Deutsche Bank and Standard Chartered. The transaction pared down SMC’s interest in Meralco to 27.1 percent from 32.8 percent.
SMC acquired the interest in Meralco in 2009 from state-owned pension funds at P90 each.
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