Construction and infrastructure conglomerate Megawide Corp. is teaming up with the state-owned Social Security System (SSS) to bid for the right to rehabilitate and operate the Ninoy Aquino International Airport (Naia), the highly congested main gateway to Metro Manila.
The proposed consortium to be formed by the fast-growing company led by a young tycoon, Edgar Saavedra, and the country’s biggest pension fund is seen as a formidable rival to the “super-consortium” formed by six of the country’s largest conglomerates who also seek to rehabilitate Naia. The rival consortium consists of the Ayala, Aboitiz, Andrew Tan, Lucio Tan, Gokongwei, Metro Pacific and Gotianun groups.
SSS chair Amado Valdez announced the potential partnership with Megawide to rehabilitate Naia yesterday during the ceremonial signing of the SSS’ entry as a small but significant stockholder in Megawide, where the pension fund has acquired a 5.17-percent stake.
“Our parameter with Megawide is not just investing in the corporation itself but leaning toward having joint ventures (JVs) with them in infrastructure projects,” Valdez said. “We’re part of that corporation to minimum extent, but we’ll be strong also in terms of putting capital in possible JVs on infrastructure that will really help the President’s (Duterte) build, build, build program, whether airports, toll ways or bridges.”
As a curtain-raiser, Valdez added that SSS and Megawide had formed a technical working group to look into the possibility of participating as a consortium in the Naia redevelopment, citing potential synergy with its redevelopment of the Mactan-Cebu International Airport.
“This is a project that will touch the common man. We’re doing it for our members,” Valdez said.
The SSS’ interest to participate in Naia redevelopment is part of its strategy to expand its brick-and-mortar investments that will provide a greater stream of recurring earnings over the long haul.
Before the Christmas break, Saavedra’s holding company Megacore Holdings Inc. sold 73.83 million shares or around 3.5 percent of Megawide shares to SSS at P17.88 a share. Prior to the block sale, the SSS had accumulated Megawide shares from the open market throughout 2017 for a total of 1.67-percent interest purchased at an average price of P18.515 a share.
“We are inside Megawide as part of policy-making but we’ll also be part of the capital formation going into significant projects,” Valdez said.
The SSS is also interested in increasing its stake in Megawide to “more or less double” its current interest or proportional to the ownership needed to acquire one board seat, added SSS Commissioner Jose Gabriel La Vina.
As a special arrangement, Megawide had already given SSS a seat in its seven-member board with a commitment for the latter to buy more shares in the future. Ideally, a 12.5-percent is needed to control a board seat in the company.
“It is encouraging that the SSS, the country’s biggest pension fund, is willing to invest in Megawide. It is an outstanding vote of confidence in the company’s vision and we are motivated to work even harder so that we can deliver positive returns to all our shareholders,” Saavedra said.
La Vina noted that prospective investments in airports, however, would typically have mid-teen return on investment (ROI), improving the SSS’ average ROI of 7.7 percent at present.
“This is a very good investment. They have a young management team, ambitious, full of energy and they really have a competitive edge in construction cost,” La Vina said. “Part of the old paradigm is to have a big brother in government but actually, it turned out that with the Cebu airport project, it was pretty transparent and they won it on their own terms.”
Megawide, in partnership with GMR group of India, won the contract to rehabilitate and operate the Cebu airport in 2013. Recently, it also submitted the best bid for the engineering, procurement and construction contract to upgrade Clark International Airport and is interested to likewise bid for its operation and maintenance contract in the future.