Philippine Stock Exchange. AFP FILE PHOTO
MANILA, Philippines–The Philippine Stock Exchange has obtained board approval to make a formal offer to buy out other shareholders in Philippine Dealing Systems Holdings Corp. (PDS) for an enterprise value of P2.25 billion, taking one step closer to the goal of consolidating local equity and fixed income markets.
In a disclosure posted late Wednesday, the PSE said its board had given the go-signal to make the formal offer to purchase the stake held by the Bankers Association of the Philippines (BAP) and other shareholders “under terms and conditions to be agreed upon by the parties and subject to corporate and regulatory approvals.”
Based on the enterprise value of P2.25 billion for PDS – the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx), Philippine Depositary and Trust Corp. and Philippine Securities Settlement Corp. — the PSE needs to pay P1.8 billion for the 80 percent remaining stake in PSE which it does not own yet.
Aside from the PSE which holds 20 percent, two other big shareholder groups are BAP and Singapore Exchange Ltd. (SGX) which, respectively, own 27 percent and 20 percent of PDS. Other shareholders are San Miguel Corp., Philippine American Life and General Insurance Co. and Social Security System.
The BAP, for its part, has already indicated it was ready to accept the PSE’s offer at this level, even if the enterprise valuation were lower than the P4 billion estimated pricing by an independent auditor hired by the bankers. Booking profit from this deal is not the BAP’s goal but to contribute to capital market development by having a unified infrastructure, banking sources said.
SGX was earlier reported to be lukewarm to the PSE’s buyout offer but industry sources have said this won’t be a deal-breaker if all other parties would sell to PSE. The local bourse needs to muster only two-thirds control of PDS to execute a merger.
The PSE’s disclosure did not indicate whether the local bourse would pay in cash or in shares of stocks. Industry sources have said that the Department of Finance is insisting that the deal be structured in a way that the PSE would buy out the BAP using its own stocks instead of cash so that the bankers would have representation in the country’s future unified capital market infrastructure, believing this would contribute to good governance.
For its part, the PSE has already obtained approval to increase its authorized capital to 120 million shares from 97.8 million, acquiring leeway to use its stocks as currency to acquire the local fixed income trading platform.
A unification, which is strongly backed by Pres. Aquino’s economic managers, is seen boosting volumes and unlocking huge savings in maintaining and continuously enhancing financial market architecture.