Liberty tender offer price too low, brokers say

Some stockbrokers and investors are up in arms over the tender offer price of Liberty Telecoms Holdings Inc., saying that the minority shareholders are not getting their fair share of the P70-billion telecom asset sale by conglomerate San Miguel Corp.

In a research note titled “Screwing Liberty” written by Lemuel Uy, an analyst from local stockbrokerage Papa Securities, the brokerage said the alleged non-disclosure of material information relating to the reassignment of highly valued frequencies held by Liberty apparently reduced the valuation of the telecom holding firm.

Vega Telecom, the parent firm of Liberty (LIB) which is now jointly owned by PLDT Inc. and Globe Telecom, recently made a tender offer to minority shareholders of Liberty at P2.20 a share, which many minority shareholders deemed too low.

In tracing how a company in control of the much coveted 700 Mhz frequency be valued at such a low price when PLDT and Globe paid SMC a total consideration of P69.1 billion primarily for that asset, Papa Securities cited representations made by SMC that all of frequency allocations of Tori Spectrum (formerly Wi-Tribe Telecoms) had been assigned to BellTel as approved by the National Telecommunications Commission on March 17, 2015.

The same report noted that the NTC had afterwards cancelled Tori Spectrum’s frequency assignment sheets for 723-738 MHz/778-793 MHz and 2555-2595 MHz frequencies. As Tori Spectrum had already ceased to be the assignee of these frequencies, the value of the frequencies was not considered in the valuation when the telecom assets were sold to PLDT and Globe.

In simple terms, Uy said Liberty’s prized possession—the 700 Mhz frequency—had apparently been transferred to the hands of a sister company, BellTel, since March 2015 and that Liberty did not get even a single centavo in return.

“Just imagine the shock of LIB investors when the realization hits them that each share of the company they own is now worth less than a stick of gum. Why were they kept in the dark? The earliest mention of the frequency reassignment was in the second quarter filing of LIB this year, disclosed on Aug. 15, 2016, just a week before the tender offer details were announced,” Uy said.

Uy said the material information was not even given the emphasis it deserved, noting this was “quietly inserted in the notes to financial statements, which not many investors read.”

“At the end of the day, San Miguel received the full value of the spectrum, PLDT and Globe have the spectrum (subject to Philippine Competition Commission approval), and the minority shareholders will receive much less than they deserve,” Uy said.

The buyers of the asset, for their part, had argued that the offer price was already “magnanimous and more than fair and reasonable” as it was already six times the maximum of the fair value range (8 to 33 centavos per share) as calculated by an independent accredited auditor.

“It appears that this situation is becoming more and more complicated. We now have a non-disclosure angle as well as a valuation issue, coupled with whether there should be a voluntary or mandatory tender offer,” said Joseph Roxas, president of Eagle Equities Inc.

SMC has yet to issue clarification on the matter.