Singapore Exchange mulls over sale of PDS stake to PSE

MANILA, Philippines–Singapore Exchange Ltd. is warming up to the idea of selling its 20-percent stake in Philippine Dealing Systems Holdings Corp. (PDS Group) to the Philippine Stock Exchange, potentially giving the local bourse more flexibility in its quest to unify the country’s capital market infrastructure.

Industry sources told the Inquirer that SGX, which was previously reluctant to sell its minority but significant stake in PDS Group due to pricing issues, now appeared interested to cede its stake.

If the sale pushes through, then PSE’s stake in PDS will increase to 74 percent.

One PSE source said gaining control of over two-thirds of PDS Group would pave the way for a merger with the local bourse instead of the “plan B” of just operating it as a subsidiary.

SGX is the single biggest investor that could determine whether the PSE would get a “super majority” of 67 percent of PDS.

Under corporate laws, the approval from 67 percent of shareholders is needed for a merger to happen.

Another PSE source affirmed SGX’s change of heart, but suggested that nothing had been cast in stone.

“[There’s] nothing definitive yet, though they have expressed interest,” the source said.

Pricing previously appeared to be a key issue for SGX, which had bought into PDS as an investor, unlike other local stakeholders who were willing to accept a “lower” pricing to support a national goal of unifying capital market systems.

The PSE offered to buy 100 percent of PDS Group—the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx), Philippine Depositary and Trust Corp. (PDTC) and Philippine Securities Settlement Corp.—for P2.25 billion.

On the other hand, industry sources earlier said an independent valuation report commissioned by the Bankers Association of the Philippines (BAP) valued the stake at around P4 billion, which was why even some member-banks were initially opposed to the sale at this price.

The P2.25-billion valuation for 100 percent of PDS was based on a multiple of 10 times PDS’ earnings for 2013 and 11 times the projected earnings for 2014.

The offer is also priced at twice the book value of PDS.

It’s unclear what has caused SGX to soften its stance but local stakeholders welcome this support to the Philippine capital markets.

The PSE earlier signed a deal to buy the 28.91-percent stake held by the BAP and some member-banks. It afterwards launched a general offer for other shareholders of PDS.

Conglomerate San Miguel Corp. and another minority investor agreed to sell a 4-percent interest, giving the PSE its current 54-percent stake.

Apart from the SGX, other PDS shareholders whose shares the local bourse had offered to buy are: Tata Consulting (8 percent), Computershare Technology (8 percent), Philippine American Life and General Insurance Co. (4 percent), Financial Executives Institute of the Philippines (1.54 percent), Investment Houses Association of the Philippines (1.12 percent) and Social Security System (1.54 percent).