JG Summit aims to raise P50B for Meralco deal

JG Summit president Lance Gokongwei: Happy with three seats. AFP FILE PHOTO

MANILA, Philippines—Gokongwei-led JG Summit Holdings Inc. is raising about P50 billion in debt to partly finance a deal to acquire San Miguel Corp.’s entire 27.1-percent stake in Manila Electric Co., the family’s most significant investment in the power business thus far, a top official said.

JG Summit president Lance Gokongwei said Tuesday that the planned fund-raising, which would cover about two-thirds of the entire P72 billion deal, was being negotiated with lenders and could take the form of bank loans and bonds.

The remaining amount would be covered by equity, he said. JG Summit has cash of about $500 million, or P21 billion, and it recently raised P12 billion from the sale of shares in food and beverage unit Universal Robina Corp.

Gokongwei noted that the family was “happy” with being a minority shareholder in Meralco, the country’s biggest power distributor. He said JG Summit would get three seats on the board.

The move was also viewed as a significant bet on the country’s power generation sector as Meralco is seeking to build up capacity to about 2,700 megawatts in the medium-term.

“As a cash investment, it is our single-largest investment. It will be our main investment in the power sector,” Gokongwei told reporters at the sidelines of Cebu Pacific’s 100 Lucky Juans contest.

The deal is still subject to certain closing conditions, Gokongwei said.

Based on the P72-billion acquisition price, the company acquired the shares at about P236 each, or at some 20-percent discount at that time. Meralco gained 0.27 percent to P300 on Tuesday.

“It’s not something you put a pay-back on. It pays 4 percent to 5 percent in dividends—you cannot rely on that. There is the belief that the company will grow as the country grows,” Gokongwei added.

The Philippine economy is projected to grow by 6 percent to 7 percent this year, and analysts estimated that this could be sustained in the coming years as infrastructure spending ramps up. But with faster growth comes the need for fresh capacity and new power supply sources, especially for Luzon, the Department of Energy said earlier.